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Pension Reform, Ownership Structure, and Corporate Governance: Evidence from Sweden

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  • Giannetti, Mariassunta
  • Laeven, Luc

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 performance 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.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6489.

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Date of creation: Sep 2007
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Handle: RePEc:cpr:ceprdp:6489

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Keywords: Control premium; Controlling shareholders; Dual class shares; Pension funds;

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  1. Mariassunta Giannetti & Andrei Simonov, 2006. "Which Investors Fear Expropriation? Evidence from Investors' Portfolio Choices," Journal of Finance, American Finance Association, vol. 61(3), pages 1507-1547, 06.
  2. Orazio P. Attanasio & Agar Brugiavini, 2003. "Social Security And Households' Saving," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1075-1119, August.
  3. Charles P. Himmelberg & R. Glenn Hubbard & Darius Palia, 2000. "Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance," NBER Working Papers 7209, National Bureau of Economic Research, Inc.
  4. Coles, Jeffrey L. & Lemmon, Michael L. & Felix Meschke, J., 2012. "Structural models and endogeneity in corporate finance: The link between managerial ownership and corporate performance," Journal of Financial Economics, Elsevier, vol. 103(1), pages 149-168.
  5. Chen, Xia & Harford, Jarrad & Li, Kai, 2007. "Monitoring: Which institutions matter?," Journal of Financial Economics, Elsevier, vol. 86(2), pages 279-305, November.
  6. Michael Faulkender & Mitchell A. Petersen, 2003. "Does the Source of Capital Affect Capital Structure?," NBER Working Papers 9930, National Bureau of Economic Research, Inc.
  7. Luc Laeven & Ross Levine, 2006. "Complex Ownership Structures and Corporate Valuations," NBER Working Papers 12675, National Bureau of Economic Research, Inc.
  8. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer & Robert W. Vishny, 1999. "Investor Protection and Corporate Valuation," NBER Working Papers 7403, National Bureau of Economic Research, Inc.
  9. Cronqvist, Henrik & Nilsson, Mattias, 2003. "Agency Costs of Controlling Minority Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(04), pages 695-719, December.
  10. Davis, Gerald F. & Kim, E. Han, 2007. "Business ties and proxy voting by mutual funds," Journal of Financial Economics, Elsevier, vol. 85(2), pages 552-570, August.
  11. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
  12. Willard T. Carleton & James M. Nelson & Michael S. Weisbach, 1998. "The Influence of Institutions on Corporate Governance through Private Negotiations: Evidence from TIAA-CREF," Journal of Finance, American Finance Association, vol. 53(4), pages 1335-1362, 08.
  13. Cronqvist, Henrik & Nilsson, Mattias, 2005. "The choice between rights offerings and private equity placements," Journal of Financial Economics, Elsevier, vol. 78(2), pages 375-407, November.
  14. Gillan, Stuart L. & Starks, Laura T., 2000. "Corporate governance proposals and shareholder activism: the role of institutional investors," Journal of Financial Economics, Elsevier, vol. 57(2), pages 275-305, August.
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Cited by:
  1. Hamdani, Assaf & Yafeh, Yishay, 2010. "Institutional Investors as Minority Shareholders: Do They Matter When Ownership Is Concentrated?," CEPR Discussion Papers 7934, C.E.P.R. Discussion Papers.
  2. Chhaochharia, Vidhi & Laeven, Luc, 2008. "Sovereign Wealth Funds: Their Investment Strategies and Performance," CEPR Discussion Papers 6959, C.E.P.R. Discussion Papers.

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