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Implicit Promises and the Timing of Defined‐Benefit Pension Plan Freezes

Year: 2025

Type: article

Abstract: ABSTRACT Firms time defined‐benefit (DB) plan freezes after CEO turnovers to protect CEO retirement benefits from cost cuts affecting the wider workforce. We document a significant increase in voluntary CEO turnovers just before the freeze, without notable post‐freeze changes. Our results suggest that firms prioritize retaining their CEOs and avoiding reputational costs over cost‐cutting measures that could negatively impact their top talent. Overall, the study uncovers the timing of the freeze as a strategy that firms use to honor pension promises to their CEOs and informs the academic debate on the relation between DB plans and employee mobility.

Source: Financial Management

DOI: 10.1111/fima.12501

Authors: Zacharias Petrou, Adamos Vlittis

Institutions: University of Liverpool, University of Cyprus

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $2,850