Institutional Investors, Savings and Capital Markets in Emerging Economies

This book argues that institutional investors such as pension funds and life insurance companies can have an important impact on capital market development and potentially on domestic saving. Chapter 2 summarizes the theoretical underpinnings and the empirical evidence for the relationships of financial systems, institutional investors, and economic development. The benefits from promoting "long-term" savings institutions are discussed in chapter 3 focusing in particular on their impact on savings and long-term financial savings as well as on their effects on stock markets. The evolution of private pension funds and of the insurance industry in industrial countries and in emerging markets is described in chapter 4. A more detailed analysis of how private pension funds can contribute to capital market development is provided for the case of Chile (chapter 5). Existing barriers for domestic and foreign institutional investors in emerging countries are stressed in chapter 6. Finally, important prerequisites for a strengthening of the institutional investment base in these markets are identified.