Year: 2007
Type: report
Abstract: The asset allocation of defined benefit pension plans is a setting where both risk shifting and risk management incentives are likely be present.Empirically, firms with poorly funded pension plans and weak credit ratings allocate a greater share of pension fund assets to safer securities such as government debt and cash, whereas firms with well-funded pension plans and strong credit ratings invest more heavily in equity.These relations hold both in the cross-section and within firms and plans over time.The incentive to limit costly financial distress plays a considerably larger role than risk shifting in explaining variation in pension fund investment policy among U.S. firms.
DOI: 10.3386/w13240
Author: Joshua Rauh
Institutions: National Bureau of Economic Research, University of Chicago
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2890173532