Date of Award

Summer 8-11-2011

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Public Management and Policy

First Advisor

Dr. Katherine G. Willoughby

Second Advisor

Dr. Carter A. Doyle

Third Advisor

Dr. W. Bartley Hildreth

Fourth Advisor

Dr. Douglas S. Noonan

Fifth Advisor

Dr. David L. Sjoquist

Sixth Advisor

Dr. Gregory D. Streib

Abstract

This study examined the determinants of public pension fund performance through the lens of agency theory. The study sought to answer the following questions: (1) How much of the fluctuation in the performance of pension plans is due to political interference - either directly from decisions made by legislatures or through the governance structure of the pension boards, after controlling for asset allocation, plan size, and other external factors? (2) Do pension board expertise, education and training, and information disclosure requirements improve the performance of pension plans? (3) Do pension trustees strategically determine the actuarial rate of return (discount rate) in order to reduce contributions in times of fiscal stress for the pension sponsor? Using longitudinal data of pension fund performance over the period 2000 to 2009 and instrumental variables methods to address endogeneity issues, the study found partial support for the agency theory hypotheses. The results indicate that political interference through reduced contributions was the main factor explaining pension performance. There was no direct evidence about the negative impact of politically appointed trustees on pension performance. The impact of these findings for current policy and future research are discussed.

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