Safety-First Pension Funds, Governance, and Market Risk: Evidence from China’s A-Share Market

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Yun'e Xie
Hebei Oriental University, Langfang 065001, China

DOI: https://doi.org/10.70267/fer.250302.108119

Keywords

public pension funds, ESG, symbolic management, governance-risk decoupling, state capitalism, China A-share market

Abstract

This paper examines how Chinese public pension funds affect corporate governance and market risk in a state-capitalist setting. Using A-share firms from 2015 to 2024, we show that pension funds display an ESG screening effect ex ante and are followed by higher post-investment ESG scores. The effect, however, is concentrated in the governance pillar and is more than twice as large in SOEs as in private firms. Despite these governance gains, pension ownership is not associated with lower stock-return volatility. We interpret this pattern as governance-risk decoupling: pension funds appear to promote visible, compliance-oriented governance upgrades, but their small stakes and the retail-dominated market limit their ability to stabilize prices. The findings refine the universal-owner view by showing that, in transitional economies, state-backed patient capital may function more as administrative legitimacy than as a direct mechanism of market-risk reduction.

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Published
Apr 17, 2026
Issue
Vol. 3 No. 2 (2026)
Section
Research Articles
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This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Xie, Y. (2026). Safety-First Pension Funds, Governance, and Market Risk: Evidence from China’s A-Share Market. Financial Economics Research, 3(2), 108-119. https://doi.org/10.70267/fer.250302.108119