The impact of pension governance practices on the public defined benefit pension performance

Abstract

Purpose

The purpose of this paper is to investigate the impact of the public pension governance practices on the public defined benefit pension (DBP) fund performance.

Design/methodology/approach

To provide a holistic evaluation of public DBP performance, this study first employs the Data Envelopment Analysis (DEA) approach to construct a relative performance measure that simultaneously takes into account the association between investment inputs and performance outputs across DBPs in our sample. A DEA regression model is then constructed to empirically examine the impact of pension governance on public DBP performance.

Findings

Using 1,544 hand-collected observations in the USA from 2002 to 2013, the findings show that the public DBP plans with a small board, appointed board trustees, and a separate investment council exhibit better performance.

Practical implications

The effectiveness of pension governance has increasingly drawn public attention, as it affects the performance of the public DBP plans that especially matter to public employees. The empirical findings of this research offer insights into recent calls to reexamine public DBP management practices and to carry out related public pension fund policy reforms.

Originality/value

The examination of public DBP governance practices in this study enriches the governance literature, particularly research on public pension funds, by using public sector data. Second, by applying the DEA method to evaluate the relative performance of public DBP funds, this study obtains a more comprehensive analysis of the public pension governance.

Citation

Xu, G., Liu, F.-C., Hsu, H.-T. and Lin, J.W. (2020), "The impact of pension governance practices on the public defined benefit pension performance", Benchmarking: An International Journal, Vol. 27 No. 1, pp. 192-214. https://doi.org/10.1108/BIJ-08-2018-0265