Corruption, governance, and public pension funds

Hongxian Zhang (), Liang Guo and Maggie Hao
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Hongxian Zhang: Missouri University of Science and Technology
Liang Guo: California State University
Maggie Hao: University of Houston Clear Lake

Review of Quantitative Finance and Accounting, 2018, vol. 51, issue 4, No 1, 883-919

Abstract: Abstract We examine the effects of state corruption as well as political and governance factors on U.S. public pension funds. We find that pension funds in states with more corruption have lower performance; a one standard deviation increase in corruption is associated with a decrease in annual returns of at least 14 basis points, and this relationship is robust to state-level and pension-level fixed effects. Pensions located in more corrupt jurisdictions also invest a larger fraction of their assets in equities. We find that having a new treasurer decreases the negative effects of corruption, suggesting that more frequent changes in administrations are beneficial in corrupt jurisdictions. Governance-related variables and political affiliation variables are by themselves not significantly related to pension returns, although these variables are associated with differences in asset allocation.

Keywords: Public pensions; Corruption; Politics; Governance (search for similar items in EconPapers)
JEL-codes: G23 G28 H75 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11156-017-0691-4

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