Corruption, Governance, and Public Pension Funds

John Wald () and Honbgxian Zhang
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John Wald: UTSA

Working Papers from College of Business, University of Texas at San Antonio

Abstract: We examine the effects of state corruption as well as political and governance factors on public pension funds. We find that pension funds in more corrupt states have lower performance; a one standard deviation increase in corruption is associated with a decrease in annual returns between 17 and 25 basis points, and this relation 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 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)
Pages: 36 pages
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:tsa:wpaper:0168fin

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