Cultural determinants of regulation and supervision of pension funds

There is considerable variation in pension systems across countries. Pension funds regulation and supervision are two characteristics of pension systems that exemplify such variation. Pension funds regulation and supervisory activities differ in their degree of intensity and strictness. We investigate to what extent national culture plays a role in explaining differences in approaches to the regulation and supervision of pension funds. As measures of national culture, Hofstede’s cultural dimensions are used. First, we find that countries characterized by higher individualism are strongly related to lower investment restrictions that pension funds are allowed to make. This relationship is found using three different measures of investment restrictions. Second, we find that higher scores on uncertainty avoidance and power distance, and lower scores on individualism are associated with stricter reporting requirements that pension funds have to fulfill. All results are robust to changes in the measures of cultural variables (updated versions of Hofstede’s cultural dimensions) and alternative estimation procedures (Tobit and Instrumental Variables regressions).