The Influence of Pension Funds on Corporate Governance
AbstractAlthough pension funds have gained importance in the last two decades, their role has not been described in detail by economic models. This paper focusses on the scope of these institutional investors when they are not satisfied with a management team of a company in which the pension fund holds a block of shares. Stock holdings by pension funds are largely dispersed. Therefore, any intervention by pension funds in corporate governance requires the formation of a coalition of pension funds. The realization of a coordinated intervention, in turn, is subject to the problems related to the provision of public goods, such as free-riding. We find that stock dispersion among pension funds, the amount of noise traders, coordination costs and the attractiveness of the exit option are relevant factors for successful interventions. The overall probability for a successful intervention, however, is quite low.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 07/63.
Length: 26 pages
Date of creation: Jan 2007
Date of revision:
Pension Funds; Public Goods; Coase Theorem;
Find related papers by JEL classification:
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
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