Pension Reform, Ownership Structure, and Corporate Governance: Evidence from a Natural Experiment

51 Pages Posted: 1 Mar 2007 Last revised: 30 Oct 2018

See all articles by Mariassunta Giannetti

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: November 1, 2007

Abstract

Sweden offers a unique natural experiment to analyze the microeconomic effects of institutionalized saving on ownership structure, corporate governance and performance of listed companies. First, the Swedish pension reform increased the participation of pension funds in the domestic stock market and caused a significant reshuffling in the ownership of the existing pension funds. Second, the availability of detailed data on firm ownership allows us to document the effects of the pension reform. We show that the effects of institutional investment on firm performance depend on the industry structure of pension funds. In particular, we find that firm valuation improves if large independent private pension funds and public pension funds increase their equity stakes in the firm, but not if smaller pension funds and pension funds related to financial institutions and industrial groups increase their shareholdings. Additionally, controlling shareholders appear reluctant to relinquish control and the control premium increases if public pension funds acquire shares.

Keywords: Pension funds, control premium, dual class shares, controlling shareholders

JEL Classification: G3, G23

Suggested Citation

Giannetti, Mariassunta and Laeven, Luc A., Pension Reform, Ownership Structure, and Corporate Governance: Evidence from a Natural Experiment (November 1, 2007). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 181/2007, EFA 2007 Ljubljana Meetings Paper, Available at SSRN: https://ssrn.com/abstract=966185 or http://dx.doi.org/10.2139/ssrn.966185

Mariassunta Giannetti (Contact Author)

Stockholm School of Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Swedish House of Finance ( email )

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Luc A. Laeven

European Central Bank (ECB) ( email )

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Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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