Pension Plan Risk-Taking: Does It Matter If the Sponsor is Publicly-Traded?

37 Pages Posted: 3 Sep 2010

Date Written: August 2, 2010

Abstract

We use a large sample of private sponsors’ defined benefit pension plans to document economically significant differences in the magnitude of plan return volatility for private versus publicly-traded sponsors. The main drivers of pension plan risk taking are different for public and private firms. The impact of the funded status of pension liabilities on volatility for publicly-traded sponsors is more than two times higher than for private sponsors. The impact of sponsor contributions for private sponsors is more than four times higher than for public sponsors. The results suggest that the alignment of the incentives of owners and plan beneficiaries is different for private versus publicly-traded sponsors.

Keywords: Pension Funds, Risk-taking

JEL Classification: G23

Suggested Citation

Gatev, Evan, Pension Plan Risk-Taking: Does It Matter If the Sponsor is Publicly-Traded? (August 2, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1669844 or http://dx.doi.org/10.2139/ssrn.1669844

Evan Gatev (Contact Author)

Simon Fraser University ( email )

Burnaby, British Columbia V5A 1S6
Canada

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