Pension funds and governance: The effect of government sponsorship

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

The issue of conflict of interest and information asymmetry underlies the relationship between management, sponsors, and pension fund participants. The governance system aimed at mitigating the conflict of interest and information asymmetry appears as practices that, even with the cost, could contribute to the effectiveness of the pension fund investments. In this context, the present study aimed to investigate empirically how the extent of Brazilian pension funds governance practices is affected by the nature of the sponsoring entity. With a sample of 208 observations collected manually, representing 104 pension funds, from 2013 and 2017, we analyzed the impact of the sponsorship on the governance of the Brazilian pension funds. We measured governance using a governance index composed of 34 indicators, built on the Brazilian pension fund legislation, guidelines and recommendations issued by public bodies, and the governance literature. The result of this study indicates that, contrary to the initial expectations of the survey, a state-controlled company sponsorship explains a better level of governance. This study contributes to a better understanding of how the adoption of governance practices works, especially with the reported cases of corruption in Brazilian pension funds.

Keywords: Governance, Sponsor, Conflict of Interest, Brazilian Pension Fund, Enforcement

Authors’ individual contribution: Conceptualization – B.de M.T., C.B.M., and D.S.S.; Methodology – B.de M.T., C.B.M., and D.S.S.; Validation – B.de M.T., C.B.M., and D.S.S.; Formal Analysis – B.de M.T., C.B.M., D.S.S., and D.F.V.; Investigation – B.de M.T.; Writing – Original Draft – B.de M.T., D.S.S., and D.F.V.; Writing – Review & Editing – C.B.M.; Visualization – B.de M.T., C.B.M., D.S.S., and D.F.V.; Supervision – C.B.M.; Project Administration – C.B.M.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G32, G38

Received: 22.01.2020
Accepted: 18.06.2020
Published online: 19.06.2020

How to cite this paper: de Medeiros Teixeira, B., Macagnan, C. B., Souza Simon, D., & Vancin, D. F. (2020). Pension funds and governance: The effect of government sponsorship. Corporate Ownership & Control, 17(4), 142-151. https://doi.org/10.22495/cocv17i4art12