Abstract
The issue of conflict of interest and information asymmetry underlies the relationship between management, sponsors, and pension fund participants. The governance system aimed at mitigating the conflict of interest and information asymmetry appears as practices that, even with the cost, could contribute to the effectiveness of the pension fund investments. In this context, the present study aimed to investigate empirically how the extent of Brazilian pension funds governance practices is affected by the nature of the sponsoring entity. With a sample of 208 observations collected manually, representing 104 pension funds, from 2013 and 2017, we analyzed the impact of the sponsorship on the governance of the Brazilian pension funds. We measured governance using a governance index composed of 34 indicators, built on the Brazilian pension fund legislation, guidelines and recommendations issued by public bodies, and the governance literature. The result of this study indicates that, contrary to the initial expectations of the survey, a state-controlled company sponsorship explains a better level of governance. This study contributes to a better understanding of how the adoption of governance practices works, especially with the reported cases of corruption in Brazilian pension funds.
Highlights
In this article, we examine how Brazilian private pension funds governance mechanisms depend on the nature of their sponsoring entities
This research aimed to verify if the nature of the sponsor is an important factor in the level of governance practices of Brazilian pension funds, through a sample of 208 observations, from 104 pension funds, in the years 2013 and 2017
It was a set of 34 governance indicators for closed supplementary pension entities that were built based on Brazilian legislation and the closed-ended governance manual of the National Superintendent of Supplementary Pension (PREVIC)
Summary
We examine how Brazilian private pension funds governance mechanisms depend on the nature of their sponsoring entities. Referred to as pension funds, are an important part of the Brazilian economy, as they play an essential role in complementing retired citizens’ pension income arising from government managed pension schemes Because of their crucial role in providing income and support for pension fund participants during their retirement, pension funds should have a long-term orientation & Wildsmith, 2007; Gospel, Pendleton, Vitols, & Wilke, 2011; Vaz de Lima & Busanelli de Aquino, 2019) This long-term orientation, may be threatened by the possibility of conflicts of interest between participants and managers (Duffett & Thomas, 1993; IFRS, 1994; Tilba & McNulty, 2013; Bradley, Pantzalis, & Yuan, 2016). This fact can occur because of their relation to the sponsoring entity
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