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http://ssrn.com/abstract=2009943
 
 

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Corporate Governance and Risk-Taking in Pension Plans: Evidence from Defined Benefit Asset Allocations


Hieu V. Phan


Michigan State University

Shantaram P. Hegde


University of Connecticut - School of Business

January 23, 2012

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

Abstract:     
Based on theoretical advice and empirical evidence suggesting that risk-taking in asset allocation enhances pension returns, we evaluate empirically whether good corporate governance leads to a larger allocation of pension assets to risky securities as compared to safe investments. Our findings suggest that firms with good external and internal corporate governance take more risk by investing heavily in equities and allocating a smaller share of the plan assets to cash, government debt, and insurance company accounts. The main underlying mechanisms appear to be higher investment returns and better pension funding status associated with higher equity and lower safe asset allocations.

Number of Pages in PDF File: 54

Keywords: Asset allocation, pension, corporate governance, risk-taking

JEL Classification: G3, G31, G34

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Date posted: February 24, 2012 ; Last revised: April 17, 2014

Suggested Citation

Phan, Hieu V. and Hegde, Shantaram P., Corporate Governance and Risk-Taking in Pension Plans: Evidence from Defined Benefit Asset Allocations (January 23, 2012). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=2009943

Contact Information

Hieu V. Phan (Contact Author)
Michigan State University ( email )
645 N Shaw Lane
Rm. 303 Eppley Center
East Lansing, MI 48824
United States
Shantaram Hegde
University of Connecticut - School of Business ( email )
School of Business
2100 Hillside Road
Storrs, CT 06269
United States
860-486-5135 (Phone)
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