Corporate Pensions and the Maturity Structure of Debt

Journal of Risk and Insurance, Forthcoming

45 Pages Posted: 11 Mar 2016 Last revised: 1 Mar 2017

See all articles by Yijia Lin

Yijia Lin

University of Nebraska at Lincoln - Department of Finance

Sheen Liu

Washington State University

Jifeng Yu

University of Nebraska-Lincoln

Date Written: January 8, 2017

Abstract

In this paper, we investigate the role of pension obligations, the most significant off-balance-sheet item, in determining corporate debt maturity and spreads. We begin by showing a significant and robust positive relationship between pension liabilities and corporate short-term debt ratio. We also find that more pension obligations cause a significant increase in the cost of debt, but this effect is mitigated by short-maturity debt. Overall, our study shows that short-term debt can reduce asymmetric information costs related to pensions.

Keywords: defined benefit pension plan, cost of debt, debt maturity, asymmetric information

Suggested Citation

Lin, Yijia and Liu, Sheen and Yu, Jifeng, Corporate Pensions and the Maturity Structure of Debt (January 8, 2017). Journal of Risk and Insurance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2745409 or http://dx.doi.org/10.2139/ssrn.2745409

Yijia Lin (Contact Author)

University of Nebraska at Lincoln - Department of Finance ( email )

Lincoln, NE 68588-0490
United States

Sheen Liu

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

Jifeng Yu

University of Nebraska-Lincoln ( email )

United States

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