The Role of Pension Business Benefits in Institutional Block Ownership and Corporate Governance

• 成果类型: Article
• 署名作者: Huang, Jing; Matsunaga, Steven R.; Wang, Z. Jay
• 署名单位: Virginia Polytechnic Institute & State University; University of Oregon
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12587
• 发表日期: 2020
• 页码: 1959-1989
• 关键词: ceo cash compensation; large shareholders; asymmetric sensitivity; AGENCY COSTS; INVESTMENT; EFFICIENCY; Activism; investors; BLOCKHOLDERS; turnover

摘要

We investigate whether potential pension contracting benefits lead institutions that provide pension services to acquire ownership blocks in firms and the implications of such blockholdings on the firms' corporate governance. We use the 2006 Pension Protection Act, which expanded pension participation in certain states, as a quasi-exogenous shock and find an increase in block ownership by pension-providing institutions in firms with substantial operations in affected states. Further, we find that the acquisition of a large block increases the likelihood that the institution will provide future pension services to the firm. With regard to corporate governance, we find that the acquisition of large pension blockholdings is associated with higher CEO pay and lower CEO turnover following poor financial performance. However, contrary to the prediction of the private benefits hypothesis, we do not find consistent evidence that large pension blockholdings are associated with declining firm profitability, suggesting that pension institutions are incentivized to exert monitoring to preserve the investment value of their blockholdings. Overall, our evidence is consistent with pension service institutions acquiring ownership blocks to obtain pension contracts, but our evidence does not support the prediction that they use their influence to compromise shareholder value.