February 2017

04Feb

Public Pensions and the Promise of Shareholder Activism for the Next Frontier of Corporate Governance: Sustainable Economic Development

By David Hess In this paper, I bring together recent developments in shareholder activism, responsible investing, and "new governance" regulation, to consider the role of public pension funds as a surrogate regulator for corporate sustainable development. Although a handful of public pensions are active in issues related to sustainability, this paper provides evidence showing that the vast majority are not. These conclusions, and explanations for why this is the case, are based in part on a survey of public pension...

February 4, 2017
Articles, Corporate Governance, Regulation,
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04Feb

The German Social Market in the World of Global Finance: Pension Investment Management and the Limits of Consensual Decision Making

By Gordon L. Clark, Daniel Mansfield & Adam Tickell In a previous paper we emphasised the changing national and international accounting standards used to measure net pension liability. Beginning with the implications of this analysis for the financing of German employer-sponsored pensions, in this paper we focus upon the internal management of corporate pension assets and liabilities. Two issues drive the analysis. One has to do with the emerging coalescence of interests joining corporate management and shareholders in relation to the management...

February 4, 2017
Articles, Corporate Governance, Investing,
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04Feb

The Rise of Pension Fund Capitalism in Europe: An Unseen Revolution?

By Adam Dixon In recent years European countries have begun to reform their pension systems favouring funded to pay-as-you-go (PAYG) social security systems and supporting the creation of more 2nd and 3rd pillar funded retirement schemes. Though funded pensions remain small in most European countries, they are growing significantly and may limit the persistence of strong 'varieties of capitalism' by providing an endogenous source of change to economic organisation and corporate governance. To explore this scenario this article examines recent...

February 4, 2017
Articles, Corporate Governance, Investing, System Sustainability, ,
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04Feb

Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan?

By Zvi Bodie, Robert C. Merton & Li Jin This paper examines the empirical question of whether systematic equity risk of US firms as measured by beta from the capital asset pricing model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet and are often...

February 4, 2017
Articles, Corporate Governance, Investing,
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04Feb

Do a Firm’s Equity Returns Reflect the Risk of Its Pension Plan?

By Zvi Bodie, Robert C. Merton & Li Jin This paper examines the empirical question of whether systematic equity risk of US firms as measured by beta from the capital asset pricing model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet and are often...

February 4, 2017
Articles, Corporate Governance, Investing,
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04Feb

Sharing High Growth across Generations: Pensions and Demographic Transition in China

By Zheng Michael Song, Kjetil Storesletten, Yikai Wang & Fabrizio Zilibotti Intergenerational inequality and old-age poverty are salient issues in contemporary China. China’s aging population threatens the fiscal sustainability of its pension system, a key vehicle for intergenerational redistribution. We analyze the positive and normative effects of alternative pension reforms, using a dynamic general equilibrium model that incorporates population dynamics and productivity growth. Although a reform is necessary, delaying its implementation implies large welfare gains for the (poorer) current generations, imposing only small...

February 4, 2017
Articles, Labor Market,
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04Feb

Lessons for an Aging Society: The Political Sustainability of Social Security Systems

By Vincenzo Galasso & Paola Profeta What is the future of social security systems in OECD countries? In our view, the answer belongs to the realm of politics. We evaluate how political constraints shape the social security system in six countries - France, Germany, Italy, Spain, the UK and the US - under population aging. Two main aspects of the aging process are relevant to the analysis. First, the increase in the dependency ratio - the ratio of retirees to...

February 4, 2017
Aging, Articles, Labor Market, ,
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04Feb

The Embedded Firm: Corporate Governance, Labor, and Finance Capitalism

By Peer C. Zumbansen & Cynthia A. Williams This paper constitutes the introduction to an edited collection, THE EMBEDDED FIRM: LABOR, CORPORATE GOVERNANCE AND FINANCE CAPITALISM (Cambridge University Press, 2011). This book brings together contributions from law, economics, sociology and politics in order to evaluate the effects of the shift to shareholder primacy in both the United States and the United Kingdom, in the context of an increasingly financialized economy. Contributors include Ruth Aguilera, William Allen, Harry Arthurs, Blanaid Clark,...

February 4, 2017
Articles, Corporate Governance, Labor Market, ,
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03Feb

The FinTech Opportunity

By Thomas Philippon This paper assesses the potential impact of FinTech on the finance industry, focusing on financial stability and access to services. I document first that financial services remain surprisingly expensive, which explains the emergence of new entrants. I then argue that the current regulatory approach is subject to significant political economy and coordination costs, and therefore unlikely to deliver much structural change. FinTech, on the other hand, can bring deep changes but is likely to create significant regulatory...

February 3, 2017
Articles, Labor Market, System Sustainability, ,
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03Feb

Putting the Pension Back in 401(k) Plans: Optimal versus Default Longevity Income Annuities

By Vanya Horneff, Raimond Maurer & Olivia S. Mitchell Most defined contribution pension plans pay benefits as lump sums, yet the US Treasury has recently encouraged firms to protect retirees from outliving their assets by converting a portion of their plan balances into longevity income annuities (LIA). These are deferred annuities which initiate payouts not later than age 85 and continue for life, and they provide an effective way to hedge systematic (individual) longevity risk for a relatively low price. Using...

February 3, 2017
Aging, Articles, Labor Market, Pension design
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