Pension plan risk-taking: does it matter if the sponsor is publicly-traded?

We use a large sample of defined benefit (DB) pension plans to document economically significant differences in the risk-taking of plans sponsored by privately-held versus publicly-traded firms. The magnitude and the main determinants of pension plan risk-taking are different for public and private...

Full description

Saved in:
Bibliographic Details
Published inJournal of pension economics & finance Vol. 12; no. 2; pp. 218 - 249
Main Authors ATANASOVA, CHRISTINA, GATEV, EVAN
Format Journal Article
LanguageEnglish
Published Cambridge, UK Cambridge University Press 01.04.2013
Subjects
Annual reports
Asset allocation
Beneficiaries
Corporate sponsorship
Equity
Funding
Incentives
Institutional investments
Investment policy
Liability
Long term debt
Pension plans
Profitability
Profits
Standard deviation
Volatility
Wages & salaries
ownership
Risk-taking
pension plans
Online AccessGet full text

Cover

More Information
Summary:We use a large sample of defined benefit (DB) pension plans to document economically significant differences in the risk-taking of plans sponsored by privately-held versus publicly-traded firms. The magnitude and the main determinants of pension plan risk-taking are different for public and private firms. The effect of pension liabilities’ funded status on risk-taking is two and a half times higher for plans with publicly-traded sponsors than for plans with private sponsors. In contrast, changing sponsor contributions has more than four times higher effect on risk-taking for plans with private sponsors. The results suggest that the alignment of incentives for the stakeholders in a pension contract is different for plans sponsored by private versus publicly-traded firms.
ISSN:1474-7472
1475-3022
DOI:10.1017/S1474747212000339