Discussion Paper Details

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

Author(s): Mariassunta Giannetti and Luc Laeven

Publication Date: September 2007

Keyword(s): Control premium, Controlling shareholders, Dual class shares and Pension funds

Programme Area(s): Financial Economics

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 Reference

Giannetti, M and Laeven, L. 2007. 'Pension Reform, Ownership Structure, and Corporate Governance: Evidence from Sweden '. London, Centre for Economic Policy Research.