Does Long-term Patient Capital Matter? The Impact of Pension Fund Investments on Firm Productivity

The digital and green transitions require long-horizon investments on an unprecedented scale. Pension funds, with their long-term liabilities, are natural providers of such investments. In this paper, we construct a comprehensive dataset that integrates firm ownership information with Danish registers, enabling us to empirically document a significant relationship between pension fund investment and firm productivity. Following such an investment, we observe a substantial increase in firm productivity, averaging between 3% and 5%. This finding is robust and persists across various methodological approaches, including accounting for selection issues and a broad array of refinements, such as controlling for the types of co-investors. Our results suggest that public policies aimed at stimulating pension funding and encouraging pension fund equity holdings could enhance the productivity of the economy.