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Pension Funds: The Importance of Corporate Governance

Author

Listed:
  • Clea Beatriz Macagnan

    (Federal University of Paraiba - Cidade Universitária - João Pessoa – PB, 58051-900, Brazil)

  • Cristiane Benetti

    (ICN Business School and CEREFIGE - 86 Rue Sergent Blandan, 54000 Nancy - France)

  • Luiz Alberto Mangoni

    (Fisul College - Av. Pres. Vargas, 561 - Centro, Garibaldi - RS, 95720-000, Brazil)

  • Daniel Francisco Vancin

    (Vale do Rio dos Sinos University - Av. Unisinos, 950 - Cristo Rei, São Leopoldo - RS, 93022-750, Brazil)

Abstract

This study analyzed whether the level of corporate governance of companies listed on the Brazilian capital market is related to the investment decisions of Brazilian pension funds. We start from the assumption that the corporate governance system mitigates the moral risk, that may arise in the relationship between corporate managers and investors and respective shareholders, Brazilian pension funds. Shareholding dispersion would enable opportunism for corporate managers, making decisions focused on their interests to the detriment of shareholders or investors. The governance system would signal that this behavior would be controlled, signaling safer behavior for investors. Thus, the hypothesis is that the level of corporate governance would attract pension funds that would understand this system as reducing investment risk. To test this, we used panel data, with a sample of 1,582 observations of companies listed on the Brazilian Stock Exchange (B3) from 2010 to 2017. The statistical results show that corporate governance positively correlates with investment in pension funds. This leads to the conclusion that, for Brazilian pension funds, companies' signaling about their corporate governance practices is a risk-mitigating factor. Furthermore, these results allow us to infer that the company's governance level associated with leverage is a differentiating signaling element as the evidence points to a positive relationship.

Suggested Citation

  • Clea Beatriz Macagnan & Cristiane Benetti & Luiz Alberto Mangoni & Daniel Francisco Vancin, 2024. "Pension Funds: The Importance of Corporate Governance," Journal of Information Economics, Anser Press, vol. 2(2), pages 24-45, June.
    • Handle: RePEc:bba:j00008:v:2:y:2024:i:2:p:24-45:d:355
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    References listed on IDEAS

    as
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    4. Channarith Meng & Wade Donald Pfau, 2010. "The Role of Pension Funds in Capital Market Development," GRIPS Discussion Papers 10-17, National Graduate Institute for Policy Studies.
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