Pension and Corporate Governance Reforms: Are They Twins?

Catalán, Mario

doi:10.4337/9781781007662.00011

Cited by 1 publication

(2 citation statements)

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“…However, it is also clear that this regulatory structure secures a captive source of funds for private banks and firms that issue domestic securities. Thus, the regulatory structure in Latin America is consistent with the political economy explanations of financial repression of Catala´n (2003), and Rajan and Zingales (2003). Most likely, the current portfolio regulations in Latin America impose significant welfare costs on workers-pensioners for the benefit of domestic banks and publicly traded firms.…”

Section: Saving Pension Reforms From the Capitalistssupporting

confidence: 77%

“…Why do financial incumbents not block the pension reforms that will eventually destroy their power, improve corporate governance, force them to be more transparent and accountable to shareholders, and punish their expropriative activities ? Catala´n (2003) applies the core idea of Rajan and Zingales to the analysis of pension and corporate governance reforms (the twin reforms) in developing countries. He observes that all the Latin American pension reforms were followed by pro-investor legal reforms, and that pension funds were restricted to hold only domestic securities, i.e.…”

Section: Saving Pension Reforms From the Capitalistsmentioning

confidence: 99%

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Pension funds and corporate governance in developing countries: what do we know and what do we need to know?

Catalán¹

2004

Journal of Pension Economics and Finance

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Conventional wisdom holds that pension reforms from pay-as-you-go to fully funded systems spur the development of stock markets through a corporate governance channel, i.e. pension funds become large shareholders of publicly traded firms and therefore have the incentives to monitor managers and improve investor protections. This paper reviews the literature on the corporate governance channel associated with pension reforms in developing countries, and asks what we know and need to know about it. We know that pension funds are not yet large shareholders of publicly traded firms in developing countries. However, econometric results suggest that pension reforms lead to stock market development, but do not allow us to identify and separate the corporate governance channel. We know that pension reforms are followed by pro-investor legislation, but there is no convincing evidence that the pro-investor laws are enforced. We need to know more about the effects of pension reform on stock prices and performance of publicly traded firms, and whether pension fund management companies act in the best interest of pensioners. The paper also reviews the political economy explanations of the links between pension fund specific capital controls and the corporate governance channel, and suggests that there is a trade-off between the objectives of pensioners' welfare maximization, and corporate governance reform and stock market development.The largest institutional investors, the group that includes the largest collection of investment capital in the world, are the pension funds. One of the most important elements to understanding the current state of corporate governance, as well as its future direction and potential, is an understanding of this group. (Robert Monks and Nell Minow, Watching the Watchers : Corporate Governance for the 21st Century).

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Section: Saving Pension Reforms From the Capitalistssupporting

confidence: 77%

Section: Saving Pension Reforms From the Capitalistsmentioning

confidence: 99%