آیا قفل کردن منابع مالی داخلی بروی بازار محلی مفید است؟ مدارک و شواهد از اصلاحات حقوق بازنشستگی لهستانی

This paper is concerned with the effect of enforced home bias on the development of emerging stock markets. It provides a detailed study of the impact on the Warsaw Stock Exchange of the Polish pension fund reforms and the associated restrictions on international investment. The time-path of market development for the Warsaw Stock Exchange is compared with a benchmark sample consisting of the other seven post-communist countries that joined the EU in May 2004. It is shown that benefits arising from the pension funds' increased investment in the home market are short-lived. In the long run, the relative performance of the Polish market returned to pre-1999 levels or worse, suggesting that enforced home bias on emerging markets may be detrimental, rather than beneficial, to the long-run development of the market.

Almost all governments and, in particular, those of developing countries, impose some restrictions on the portfolio composition of pension funds. In particular, tight limits are commonly imposed on international investment. This attitude is in stark contrast to the received wisdom of the financial literature, which suggests that such restrictions can have a negative impact on the efficiency of portfolio allocation. This empirical finance literature, however, has concentrated on the existence of home bias and its negative impact within developed markets.1 The impact of enforced home bias on the development of emerging markets has received almost no attention and consequently is less understood. However, as Roldos (2004) says, understanding the phenomena is “one of the key questions in emerging markets and one of the key challenges for regulators of securities markets and the pension industry”. There are reasons to think that home bias may be particularly detrimental for emerging markets.2 For example, big institutional investors (and in particular, pension funds) may have far more effect on the development of an emerging market since, by nature, these markets are less liquid, less informationally efficient, and more prone to instabilities. One of the reasons that this issue has not been analysed empirically is that it is hard to find case studies that have two characteristics: (i) the volume of funds that are restricted need to be significant relative to the emerging home market and (ii) there has to be a relatively good set of benchmark markets at a similar stage of development so that the impact of the enforced home bias can be isolated. This paper focuses on an experiment that encompasses these two requirements. It looks at the development of the Polish stock exchange and compares it against the development of other emerging stock markets operating in Central and Eastern Europe in the period 1996–2004. In 1999, as the result of the introduction of mandatory pension schemes in Poland, pension funds started to operate on the Polish market. From the beginning these funds faced strong restrictions on international investments. In consequence, the funds had no choice but to invest heavily on the local market and the equity investment of these funds quickly became significant relative to the overall size of the market (e.g., in 2003 the equity investment of the pension funds already represented 38% of all equity under free float on the Warsaw Stock Exchange, WSE). To fully answer the question of whether pension funds' equity investments have a positive impact on the development of a stock market (in this case on the development of the WSE), the analysis needs to be conducted on two levels. First, the characteristics of the exchange over time must be examined in order to observe whether there are any differences in characteristics of the pre, and during pension funds' investment periods. Second, to be able to fully isolate the effect and to abstract from other specific effects, as far as possible, the comparison must also be conducted on an international level. The “difference in difference” analysis aims to distinguish between changes that are characteristic to the Polish market and changes that characterise all the local markets at a similar level of development operating in a similar (local and global) economic environment.3 Due to its geographical location, the economic transition experience and the current EU enlargement the Polish equity market can be compared with and contrasted against the equity markets operating in the other seven post-communist countries that joined the EU in May 2004. Therefore, the processes taking place on the WSE can be better understood than if the Polish data alone were analysed. To give a foretaste of the main results, I show that the intensive investment of the pension funds in the local market had a strong short-term effect on the WSE. The market rose in absolute terms and rose against the benchmark markets. Standard measures of development (e.g., liquidity, interdependence with developed markets) also improved relative to the benchmark markets. However, I find no evidence to support the claim that the intensive investments of the pension funds have a permanent stimulating impact on the development of the WSE. In contrast, the market performance and measures of market development at best fall back to their original position in comparison with the other post-communist markets and one can make a case for suggesting that the relative position is worse at the end of the period than at the start. In summary, it can be said that if there is any long-term impact on the WSE it appears to be negative rather than positive. These findings support sceptical comments by Singh (1996), and Roldos (2004) on the negative impact of institutional investors on the development of underdeveloped markets.4 It also supports Impravido et al. (2003) who stress that the development of financial structures is a prerequisite for the success of the pension reforms especially in the case of countries with financial sectors being too small to create competition and liquidity. However, the role and importance of market openness is not always supported. Vittas (2000) argues that the openness of a local market is one of the necessary pre-conditions for the development of a local stock market and success of pension reforms, but Frenkel and Menkhoff (2004) argue that “activities of foreign investors in emerging economies (…) are not simply positive for these countries but also can exert adverse effects”. They argue that foreign (less informed) investors may have a strong negative impact on the relative position of local investors as “they are likely to amplify occurring imbalances or even trigger financial shocks”. To avoid, or at least to minimise, such situations the authors propose that local investors should be encouraged to internationally diversify their portfolios. That is, not only should foreign capital come to a developing country, but also a developing country's capital should be invested on international markets. This however, is opposed by some economists (particularly those associated with actuarial industry) who argue that since pension payments are bond-like in nature, pension funds should not take risks with the sponsoring company's shareholders' funds, should abandon the idea of international and even intra-domestic diversification, and. heavily, or even completely, invest in government (domestic) bonds (see, e.g., Bodie, 1995 and Bader and Gold, 2003). However, even if such investment strategies fulfil the duty towards financing government debt, they do not make the investment safer or even profidtable enough to cover pension funds' liabilities.5 Furthermore, it is not even clear that it has a positive impact on the development of domestic stock markets in the short and long run, and, in consequence, on the economic development of a country. In the light of the above, it is clearly important to improve our understanding of whether institutional investors, and pension funds in particular, do indeed stimulate local market growth or whether they represent a potential threat to market development. If the emergence of “locked-in” pension funds stimulate local market growth, then one should observe a long-term improvement in market properties and characteristics. In particular, physical growth of the market through an increase in the market capitalisation, number of listed securities, higher liquidity, higher turnover, improvement in market efficiency and higher integration with other markets (especially developed markets) should be observed. However, if the institutional investors do not help markets to develop, then their investment might have, at best, a short-term impact on the market. The paper is organised as follows. Section 2 presents an overview of the pension reform in Poland, the main characteristics of the pension fund portfolios and the effect on the composition of the market. Section 3 presents our main empirical findings and Section 4 closes with conclusions.

In this paper fundamental properties of the Warsaw Stock Exchange and the other exchanges operating in the post-communist countries that joined the EU in May 2004 are analysed in order to assess the impact of the pension funds' equity investments on the development of the Polish exchange. If the emergence of the pension funds has a positive impact on the development of the WSE the presented measures (size, liquidity, volatility, concentration, efficiency and integration) should improve over time on the Polish market itself and in comparison with the other markets. This is not the case. Although some immediate benefits relative to the benchmark markets can be observed, these are very short-term and are concentrated in the period 1999–2000, i.e., during the first years of the pension funds operation when their portfolios were set up. After this period, for most measures, the relative performance of the Polish market returned to pre-1999 levels or worse. This suggests that worries expressed by several researchers (e.g., Singh, 1996 and Frenkel and Menkhoff, 2004) about the negative impact of the appearance of big institutional investors on underdeveloped markets may be correct. That is, enforced home bias on emerging markets may be detrimental to the long-run development of the market. This has implications for the development of stock markets and financial structures in developing countries, and their role in development, as well as the issue of the design of pension reform.