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Do pension funds provide financial stability? Evidence from European Union countries

Author

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  • Seda Peksevim

    (Bogazici University)

  • Metin Ercan

    (Bogazici University)

Abstract

We investigate the relationship between pension funds and financial stability in 25 European Union countries for the period from 2001–2017. We find that pension funds significantly reduce financial stress in crisis and non-crisis times but only in strong governance countries, and those governed by the prudent man rule provide additional stability to these countries. However, their effect is destabilizing in weak governance countries. These findings point to an important policy implication: automatic enrollment programs aimed at increasing participation in pension plans can support the stability of financial markets in strong governance countries of the European Union.

Suggested Citation

  • Seda Peksevim & Metin Ercan, 2024. "Do pension funds provide financial stability? Evidence from European Union countries," Journal of Financial Services Research, Springer;Western Finance Association, vol. 66(3), pages 297-328, December.
    • Handle: RePEc:kap:jfsres:v:66:y:2024:i:3:d:10.1007_s10693-023-00408-4
    DOI: 10.1007/s10693-023-00408-4
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    More about this item

    Keywords

    Pension funds; Financial stability; Prudent man rule; Governance; European Union countries;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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