Abstract
Representation on pension fund boards by state officials—often determined by statute decades past—is negatively related to the performance of private equity investments made by the pension fund, despite state officials’ relatively strong financial education and experience. Their underperformance appears to be partly driven by poor investment decisions consistent with political expediency, and is also positively related to political contributions from the finance industry. Boards dominated by elected rank-and-file plan participants also underperform, but to a smaller extent and due to these trustees’ lesser financial experience.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 2041-2086 |
| Number of pages | 46 |
| Journal | Journal of Finance |
| Volume | 73 |
| Issue number | 5 |
| DOIs | |
| State | Published - Oct 2018 |
Funding
∗Aleksandar Andonov is with Erasmus University Rotterdam. Yael V. Hochberg is with Rice University and NBER. Joshua D. Rauh is with Stanford University and NBER. Aleksandar An-donov, Yael V. Hochberg, and Joshua D. Rauh have read the Journal of Finance’s disclosure policy and have no conflicts of interest to disclose. We are grateful to Eddy Hu, Ruomeng Lu, Jo Sun, and Cindy Wu for research assistance, to Sunil Wahal for help with the consultants data, and to Itzhak Ben David, Randolph Cohen, Richard Evans, Victoria Ivashina, Steve Kaplan, Josh Lerner, Ron Masulis, Ludovic Phalippou, Denis Sosyura, Andrei Shleifer, Joacim Tag, and seminar, workshop, and conference participants at Erasmus University, Harvard Business School, Oxford University, Stockholm School of Economics, the joint Berkeley-Stanford finance seminar, Arizona State University, University of California San Diego, Carnegie-Mellon University, University of New South Wales, Australian National University, University of Hong Kong, Columbia University, Rotman ICPM, Luxembourg Asset Management Summit, NBER Law and Economics Summer Institute, NBER Corporate Finance, NBER Entrepreneurship, the UNC Private Equity Conference, the Finance Down Under Conference, the European Finance Association, and the American Finance Association for helpful comments and suggestions. The authors are grateful for funding from ICPM in support of this project. The Internet Appendix for this paper is available in the online version of this article on the Journal of Finance website.
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics