The Role of Pension Funds in Capital Market Development

Channarith Meng · Wade D. Pfau

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Finance, Markets, and Regulation Financial Markets and Investment Strategies Corporate Finance and Governance

Abstract

This paper provides an investigation of the impacts of pension funds on capital market development, both for stock markets and bond markets. For the overall sample of countries, we find that pension fund financial assets have positive impacts on stock market depth and liquidity as well as private bond market depth. However, when we split the countries into two groups according to their level of financial development, the impacts are only significant for countries with „high" financial development. Pension funds do not impact capital market development in the countries with a „low‟ level of financial development. These findings are based on a biased-corrected Least Square Dummy Variables (LSDVC) estimator. The results suggest that countries with ‘low’ financial development should reconsider the management approach and investment strategies for their pension funds.

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References

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2017The relationship between pension funds and the stock market: Does the aging population of Europe affect it?2019Pension funds and stock market development in OECD countries: Novel evidence from a panel VAR 2012Growth of Asian Pension Assets: Implications for Financial and Capital Markets 2015Pension reform and capital market development in Central and Eastern European countries

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