Title

Corruption, Governance, and Public Pension Funds

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.

Department(s)

Business and Information Technology

Keywords and Phrases

Corruption; Governance; Politics; Public pensions

International Standard Serial Number (ISSN)

0924-865X

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2018 Springer Verlag, All rights reserved.

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