Growth of Asian Pension Assets: Implications for Financial and Capital Markets

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. A draft version of this paper was presented at the conference on New Thinking on Social Security in Asia, held on 17 November 2011 in Tokyo. The author would like to thank participants at the conference for their constructive comments, in particular Mukul Asher, Gloria Pasadilla, Stephen Grenville, Wade Donald Pfau, and Amlan Roy.The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan AbstractPension assets have seen rapid growth world-wide over the past decades, although they suffered large losses during the global financial crisis of [2007][2008]. Such growth is notably due to both structural and parametric pension reforms since the 1980s. In the Asian region too, the pension market has steadily expanded. This paper seeks to identify the impact of Asian pension funds on selected key transmission mechanisms from pension reform to financial development. Utilizing a panel error correction model, we found a statistical relationship between pension asset growth and development of financial and capital markets. The main policy implication is that governments in Asia should continue and/or strengthen pension reforms towards more prefunding of future liabilities, since it brings beneficial impacts on the financial market.

Corporate sustainability and institutional shareholders: The pressure of social responsible pension funds on environmental firm practices

“…Conversely, firms with inferior ESG procedures are less profitable in the long term (Himick & Audousset‐Coulier, ; Vitols, ). Additionally, an extensive literature finds that pension funds achieve more efficient investments and improve market capitalization (Davis, ; Hu, ; Meng & Pfau, ; Vittas, ). In line with this evidence, we hypothesize the following:H2 The ESG practices enhanced by SR pension funds increase firm prices and profitability.H3 Higher pension‐fund shareholding positively affects firm value.…”

The relationship between pension funds and the stock market: Does the aging population of Europe affect it?

“…Meng and Pfau (2010) find that pension assets improve market capitalization and liquidity in countries with high levels of financial development. In contrast, Hu (2012) studies Asian occupational pension funds and finds that pension funds only have a positive influence on the market capitalization of the least developed economies.…”

Global pension systems and their reform: Worldwide drivers, trends and challenges

“…The crisis after 2007 left a dent in most but not all countries and regions, which has not yet been recovered by end‐2011 (Towers Watson, ). Data for Asia and the Pacific signal higher ratios of pension assets to GDP in 2010 compared to 2007 in all reviewed economies (Hu, ).…”

“…Albeit largely temporary, the situation had not fully recovered by the end of 2010 in OECD countries (OECD, 2011b), while pension fund asset to GDP ratios in countries of Asia and the Pacific by the end of 2010 were well above their 2007 levels (Hu, ). For the latter, this reflects both recoveries in asset prices as well as coverage levels.…”