The influence of political bias in state pension funds

Daniel Bradley, Christos Pantzalis and Xiaojing Yuan

Journal of Financial Economics, 2016, vol. 119, issue 1, 69-91

Abstract: Using a sample of state pension funds’ equity holdings, we find evidence of not only local bias, but also bias towards politically-connected stocks. Political bias is detrimental to fund performance. State pension funds have longer holding durations of politically-connected local firms and display disposition behavior in these positions. Political bias is positively related to the percentage of politically-affiliated trustees on the board and Congressional connections. The more politically-affiliated trustees on the board, the more the fund shifts toward risky asset allocations. Overall, our results imply that political bias is likely costly to taxpayers and pension beneficiaries.

Keywords: State pension funds; Political bias; Pension beneficiaries; Disposition effect (search for similar items in EconPapers)
JEL-codes: G11 H55 H75 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:119:y:2016:i:1:p:69-91

DOI: 10.1016/j.jfineco.2015.08.017

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