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Presidential Address: Pension Policy and the Financial System

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  • DAVID S. SCHARFSTEIN

Abstract

In this paper, I examine the effect of pension policy on the structure of financial systems around the world. In particular, I explore the hypothesis that policies that promote pension savings also promote the development of capital markets. I present a model that endogenizes the extent to which savings are intermediated through banks or capital markets, and derive implications for corporate finance, household finance, banking, and the size of the financial sector. I then present a number of facts that are broadly consistent with the theory and examine a variety of alternative explanations of my findings.

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  • David S. Scharfstein, 2018. "Presidential Address: Pension Policy and the Financial System," Journal of Finance, American Finance Association, vol. 73(4), pages 1463-1512, August.
    • Handle: RePEc:bla:jfinan:v:73:y:2018:i:4:p:1463-1512
    DOI: 10.1111/jofi.12710
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    Cited by:

    1. Wang, Wenzhao & Duxbury, Darren, 2021. "Institutional investor sentiment and the mean-variance relationship: Global evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 415-441.
    2. Westerhout, Ed & Meijdam, Lex & Ponds, Eduard & Bonenkamp, Jan, 2022. "Should we revive PAYG? On the optimal pension system in view of current economic trends," European Economic Review, Elsevier, vol. 148(C).
    3. Wang, Wenzhao & Su, Chen & Duxbury, Darren, 2021. "Investor sentiment and stock returns: Global evidence," Journal of Empirical Finance, Elsevier, vol. 63(C), pages 365-391.
    4. Bank for International Settlements, 2019. "Establishing viable capital markets," CGFS Papers, Bank for International Settlements, number 62, december.
    5. Holland, Kateryna, 2019. "Government investment in publicly traded firms," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 319-342.
    6. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian & William L. Skimmyhorn, 2022. "Borrowing to Save? The Impact of Automatic Enrollment on Debt," Journal of Finance, American Finance Association, vol. 77(1), pages 403-447, February.
    7. Bo Becker & Efraim Benmelech, 2021. "The Resilience of the U.S. Corporate Bond Market During Financial Crises," NBER Working Papers 28868, National Bureau of Economic Research, Inc.
    8. Facundo Piguillem & Guillermo Ordonez, 2015. "Retirement in the Shadow (Banking)," 2015 Meeting Papers 1200, Society for Economic Dynamics.
    9. Braun, Benjamin, 2021. "From exit to control: The structural power of finance under asset manager capitalism," SocArXiv 4uesc, Center for Open Science.
    10. Torben M. Andersen, 2023. "Pensions and the Nordic Welfare Model," CESifo Working Paper Series 10321, CESifo.
    11. William Diamond, 2020. "Safety Transformation and the Structure of the Financial System," Journal of Finance, American Finance Association, vol. 75(6), pages 2973-3012, December.
    12. Pástor, Luboš & Allen, Franklin, 2018. "The Capital Markets Union: Key Challenges," CEPR Discussion Papers 12761, C.E.P.R. Discussion Papers.
    13. Johan Hombert & Victor Lyonnet, 2022. "Can Risk Be Shared across Investor Cohorts? Evidence from a Popular Savings Product," The Review of Financial Studies, Society for Financial Studies, vol. 35(12), pages 5387-5437.
    14. Darmouni, Olivier & Papoutsi, Melina, 2022. "The rise of bond financing in Europe: five facts about new and small issuers," Working Paper Series 2663, European Central Bank.
    15. Tsai, Hui-Ju & Chiang, Yao-Min, 2020. "Pension policy and the IPO market," Finance Research Letters, Elsevier, vol. 34(C).
    16. Kristy Jansen, 2023. "Long-term Investors, Demand Shifts, and Yields," Working Papers 769, DNB.
    17. Huang, Yin-Siang & Lee, Cheng-Few & Lin, Chih-Yung, 2023. "Applications of fixed effect models to managerial risk-taking incentives," The Quarterly Review of Economics and Finance, Elsevier, vol. 92(C), pages 249-261.
    18. Barria, Rodrigo & Pinter, Gabor, 2023. "Mispricing in inflation markets," Bank of England working papers 1034, Bank of England.

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