Pension Fund Board Governance and Asset Allocation: Evidence from Switzerland
45 Pages Posted: 6 Mar 2019 Last revised: 5 Dec 2019
Date Written: November 15, 2019
We study whether pension fund board governance relates to asset allocation and show that well-governed boards have greater international diversification and lower cash holdings. In particular, boards that establish comprehensive investment policies invest more in risky assets, in foreign assets and hold less cash. To rationalize these findings, we argue that a comprehensive investment policy is likely to proxy for the financial expertise available to the fund while it provides the set up to facilitate decision making. Further, we show that the presence of external financial experts is associated with lower cash holdings and that the greater risk-taking is consistent with prudent behavior.
Keywords: Pension Funds, Board Governance, Asset Allocation, Switzerland
JEL Classification: G11, G20, G23
Suggested Citation: Suggested Citation