Pension funds and corporate governance in developing countries: what do we know and what do we need to know?

2004 ◽  
Vol 3 (2) ◽  
pp. 197-232 ◽  
Author(s):  
MARIO CATALÁN
Keyword(s):  
Developing Countries ◽  
Corporate Governance ◽  
Stock Market ◽  
Pension Fund ◽  
Pension Funds ◽  
Market Development ◽  
Publicly Traded ◽  
Stock Market Development ◽  
Pension Reforms ◽  
Publicly Traded Firms

Conventional wisdom holds that pension reforms from pay-as-you-go to fully funded systems spur the development of stock markets through a corporate governance channel, i.e. pension funds become large shareholders of publicly traded firms and therefore have the incentives to monitor managers and improve investor protections. This paper reviews the literature on the corporate governance channel associated with pension reforms in developing countries, and asks what we know and need to know about it. We know that pension funds are not yet large shareholders of publicly traded firms in developing countries. However, econometric results suggest that pension reforms lead to stock market development, but do not allow us to identify and separate the corporate governance channel. We know that pension reforms are followed by pro-investor legislation, but there is no convincing evidence that the pro-investor laws are enforced. We need to know more about the effects of pension reform on stock prices and performance of publicly traded firms, and whether pension fund management companies act in the best interest of pensioners. The paper also reviews the political economy explanations of the links between pension fund specific capital controls and the corporate governance channel, and suggests that there is a trade-off between the objectives of pensioners' welfare maximization, and corporate governance reform and stock market development.

An investigation of the post-privatization firms’ financial performance in Nigeria: the role of corporate governance practices

2019 ◽  
Vol 19 (3) ◽  
pp. 404-418 ◽  
Author(s):  
Ojonugwa Usman ◽  
Umoru Adejo Yakubu
Keyword(s):  
Corporate Governance ◽  
Stock Market ◽  
Financial Performance ◽  
Stock Exchange ◽  
Market Development ◽  
Board Composition ◽  
Content Type ◽  
Stock Market Development ◽  
Governance Practices

Purpose The purpose of this study is to investigate the role of corporate governance practices on the post-privatization financial performance of the firms listed on the Nigerian Stock Exchange (NSE) over the period 2005-2014. Design/methodology/approach The study uses a two-step dynamic system Generalized Method of Moments (GMM) estimation technique for 27 privatized firms by considering a wide range of controlled variables such as managerial shareholdings, board composition, debt financing and stock market development. Findings The empirical result suggests that the improvement in the firms’ financial performance is attributed to good corporate governance practices through effective board composition, debt financing (leverage) and stock market development. The result further shows no substantial evidence to support that managerial shareholding improves firms’ financial performance. Research limitations/implications Therefore, based on the empirical findings of this study, the authors recommend that the firms need to maintain the optimum board composition and the ratio of debt to share capital as well as developing the stock market to function effectively. Originality/value This study contributes to the existing literature in several ways: (1) the first time that the role of corporate governance is considered in explaining the post-privatization financial performance of firms listed on the Nigerian Stock Exchange; (2) the paper applies a two-step dynamic system GMM estimation technique, proposed by Arellano and Bover (1995) and Blundell and Bond (1998) to control for the serial correlation and heterogeneity, which remain the major weaknesses of the panel data modeling in the literature.

scholarly journals The impact of stock market on enterprise capital structure in ASEAN developing countries

2021 ◽  
Vol 5 (1) ◽  
pp. 1359-1367
Author(s):  
Thuan Nguyen ◽  
Loc Tram ◽  
Nguyễn Thanh Liêm
Keyword(s):  
Developing Countries ◽  
Stock Market ◽  
Capital Structure ◽  
Statistical Significance ◽  
Market Development ◽  
Stock Market Development ◽  
Market Capitalization ◽  
Negative Effect ◽  
The Impact ◽  
Stock Market Capitalization

Capital structure is one of the topics in which business managers as well as academics are always interested, because it has many important implications. This problem in developing countries is even more relevant due to the low level of financial development in these countries, leading to uncertain access to external capital by firms. This paper focuses on the impact of stock market development on capital structure in five developing countries in ASEAN, namely Indonesia, Malaysia, Philippines, Thailand and Vietnam, for the period 2010 - 2018. Stock market development is measured in four different ways: Stock market capitalization to GDP (MACAP), total value of shares traded to GDP (LIQ1), total value of shares traded to stock market capitalization (LIQ2) and average of the three indexes (STOCK). The results show that development of stock market has different impacts on capital structure, depending on the measures used to reflect the stock market development. Specifically, MACAP, LIQ2 and STOCK do not reach statistical significance, while LIQ1 has a negative effect. In addition, firm size (SIZE), tangible assets (TANG), growth opportunities (TOBINQ), inflation (INF) and GDP growth (GDPGR) positively affect capital structure; while firms' profit (ROA) has negative effect. Based on the research findings, the research offers several implications for relevant stakeholders.

scholarly journals Determinants of stock market development: The case of developing countries and Vietnam

2017 ◽  
Vol 24 (01) ◽  
pp. 32-53
Author(s):  
Thanh Su Dinh ◽  
Hoai Bui Thi Mai ◽  
Bon Nguyen Van
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Stock Market ◽  
Money Supply ◽  
Rule Of Law ◽  
Market Liquidity ◽  
Market Development ◽  
Stock Market Development ◽  
Government Effectiveness ◽  
Domestic Credit

Stock market is a key channel to the mobilization of long-term capi-tal in an economy, and determinants of stock market development in developing countries are still undecided. This paper aims to inves-tigate these determinants in Vietnam and other developing countries, whose differences are also pointed out by applying two-way Gener-alized Method of Moments to the panel data of 36 developing countries over the period of 2003–2014. Our findings are intriguing. First, in developing countries economic growth, domestic credit, and stock market liquidity are positive determinants of the development of stock market. While the effect of money supply is negative, insti-tutional factors such as government effectiveness and rule of law have significantly positive impacts, in contrast to corruption control and political stability (whose impacts are significant and negative). Second, regarding the development of the stock market in Vietnam, the effects of such macroeconomic factors as economic growth, domestic investment, foreign direct investment, domestic credit, broad money supply, stock market liquidity, and inflation are signif-icant and negative, whereas those of all institution variables, includ-ing control of corruption, government effectiveness, political stabil-ity, regulatory quality, rule of law, and voice and accountability, are significant and positive. This implies that well-established institutions are crucial for promoting a demand for stocks and stock market performance in Vietnam.

scholarly journals The dynamics of capital market development in Zimbabwe

2012 ◽  
Vol 9 (2) ◽  
pp. 355-363
Author(s):  
Kunofiwa Tsaurai ◽  
Nicholas M. Odhiambo
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Stock Market ◽  
Capital Market ◽  
Positive Influence ◽  
Market Development ◽  
Stock Market Development ◽  
Domestic Savings ◽  
Recent Debate

This paper takes stock of the achievements, the trends, as well as the challenges facing the stock market development in Zimbabwe. The study has been motivated by the recent debate on the role of stock market development in economic growth in developing countries. Apart from highlighting the role of stock market development, as well as the efficacy of the stock market in bolstering economic growth in Zimbabwe, the study also pinpoints some of the factors that limit the stock market development in Zimbabwe. The findings of this study show that the experience of Zimbabwe with stock market development, just as in many other developing countries, is mixed. In particular, the positive influence of stock market development on savings and investment remains low in Zimbabwe. While stock market development has been increasing, the country’s gross domestic savings and investment have been low and subsiding. This suggests that Zimbabwe’s gross national savings could be stock market development inelastic.

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