Does Freezing a Defined-Benefit Pension Plan Increase Company Value? Empirical Evidence

Posted: 23 Sep 2009

See all articles by Brendan McFarland

Brendan McFarland

Willis Towers Watson

Gaobo Pang

Mark J. Warshawsky

Towers Watson; Mercatus Center at George Mason University

Date Written: August 5, 2009


This study empirically tests whether freezing or closing a defined-benefit (DB) pension plan increases the sponsoring company’s market value. The database used for this study consists of 82 publicly traded U.S. companies that announced freezes/closes in 2003-2007. On the basis of this extensive sample and through a set of parametric and nonparametric tests under the event study methodology, the study finds generally negative or insignificant abnormal returns in stock prices that can be associated with the freeze/close events. Little evidence supports the hypothesis that freezing or closing a DB plan increases company value.

Note: The views expressed in this article are the authors’ alone and do not necessarily reflect the views of Watson Wyatt Worldwide.

Keywords: Equity Investments, Research Sources, Corporate Finance, Long- and Short-Term Financing Decisions, Risk Measurement and Management, Firm/Enterprise Risk, Business Strategy, Long-Term Strategic Planning

Suggested Citation

McFarland, Brendan and Pang, Gaobo and Warshawsky, Mark J., Does Freezing a Defined-Benefit Pension Plan Increase Company Value? Empirical Evidence (August 5, 2009). Financial Analysts Journal, Vol. 65, No. 4, 2009, Available at SSRN:

Brendan McFarland (Contact Author)

Willis Towers Watson ( email )

United States

Mark J. Warshawsky

Towers Watson ( email )

Arlington, VA
United States

Mercatus Center at George Mason University

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

No contact information is available for Gaobo Pang

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