A Study of Asset Allocation of Defined Benefit Pension Plans : Evidence from Korean Firms
The retirement pension system in the Korean market was introduced in 2005. The goal of the retirement pension system is to serve as a stable retirement income safety device under the multi-pillar pension system. As of the end of 2022, the accumulated pension assets is reached about 300 trillion won, but it is shallow compared to those of advanced pension countries and the OECD average. The shortcut to accumulating pension assets is improving investment performance through asset allocation and long-term investment. However, the current Korean retirement pension system is criticized for not achieving the effect of asset allocation due to excessive concentration on safe assets, which is an important cause of poor investment performance. This study analyzes the asset allocation of the pension funds of Korean firms adopting the defined benefit (DB) pension plan. For this study, data was constructed by manually collecting asset allocation data of pension funds for 526 firms listed on the KOSPI market during the sample period from 2013 to 2019. This study is the first to analyze the asset allocation behavior of retirement pensions for the Korean listed companies adopting the DB plan. The main empirical results are as follows. First, the average share of safe assets on total pension assets is about 82%. This result means that the Korean listed companies are investing most of their retirement pension assets in safe assets. In addition, this asset allocation behavior centered on safe assets continues despite the rapid increase in the size and the pension funded ratio (PFR) of pension funds during the sample period. Second, rebalancing between safe and risky assets during the sample period is hardly performed. Strategic asset allocation based on long-term target return and risk or tactical asset allocation reflecting short-term changes in market conditions is not being performed appropriately. Third, the relationship between the PFR and the share of safe assets appears in an inverted U-shape. In the group of under-funded firms with a low PFR, the higher the PFR, the higher the proportion of investment in safe assets. On the other hand, in the group with a high PFR, the higher the PFR, the higher the investment ratio of risky assets. These results mean that the asset allocation behavior of retirement pensions in the Korean listed companies adopting the DB plan supports the risk management hypothesis rather than the risk transfer hypothesis. However, as shown in the analysis of the characteristics of under-funded companies, because the change of risky asset allocation ratio is insignificant and the size of retirement pension assets is small, it has limitations in judging that it is generally supported. Additionally, this study shows that establishing and providing a national database containing information on asset allocation for retirement pensions is academically and practically urgent.
A Study of Asset Allocation of Defined Benefit Pension Plans : Evidence from Korean Firms
The Relationship between the Idiosyncratic Volatility Puzzle and Trading Volume by Trader Types
The relationship between idiosyncratic volatility and investors’ trading weight is studied from February 2000 to June 2022, targeting stocks listed in the KOSPI and the KOSDAQ. The idiosyncratic volatility puzzle is examined according to the individual investors’ total trading weight(TW), net buying TW, intra-individual TW, and buying (selling) TW. The individual total TW has a positive (+) effect on total volatility(TV), systematic volatility, idiosyncratic volatility(IV), and especially IV²/TV². The IV puzzles appear differently in the KOSPI and the KOSDAQ. In the KOSPI, we find that statistically significant high risk-high return results, which coincide with conventional financial theory rather than the IV puzzle, in some portfolios with a low individual investors’ total TW and some portfolios with a low intra-individual TW, respectively. We newly find that the intra-individual TW can cause the IV puzzle through these results.
The Relationship between the Idiosyncratic Volatility Puzzle and Trading Volume by Trader Types
Review of Behavioral Finance Studies on Korean Capital Markets
This paper presents a comprehensive review of the behavioral finance literature on Korean financial markets, published recently in Korean academic journals. Our survey of behavioral finance in Korea is the follow-up work of Kim and Byun (2011). As part of the 2010 knowledge database project by the Korean Finance Association, we have previously reviewed behavioral studies in Korea. Compared to the environment at the time of the previous survey, most academic journals eagerly accept research articles from behavioral finance perspectives. Behavioral corporate finance has produced several studies on investor sentiment and managerial overconfidence. However, finding research on experimental tests or survey analyses from Korean finance journals remains challenging. This area requires interdisciplinary work with psychology researchers. Moreover, research methodologies using AI or machine learning could be more frequently used in future studies.
Review of Behavioral Finance Studies on Korean Capital Markets
A Comprehensive Survey of the Literature on Corporate Social Responsibility in Korean Firms
This study surveys prior studies on corporate social responsibility (CSR) in Korean firms that have been conducted between 2000 and the present. It introduces how Korean researchers define CSR conceptually and develop CSR-related theories. We then discuss how CSR affects Korean firms and stakeholders by comprehensively reviewing prior studies. To this end, we collect and categorize CSR-related papers by subtopics, such as CSR concept, firm value, cost of capital, risk, compensation and ownership structure, and review the research results by topic. We then also review studies on responsible investment (RI). Lastly, we suggest topics and directions for future research.
A Comprehensive Survey of the Literature on Corporate Social Responsibility in Korean Firms
