Pension Funding, Pension Asset Allocation, and Corporate Finance: Evidence from Individual Company Data

64 Pages Posted: 22 Jun 2004 Last revised: 15 Aug 2010

See all articles by Benjamin M. Friedman

Benjamin M. Friedman

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: August 1982

Abstract

This paper examines the relationship between U.S. corporations' management of their pension plans and their management of the more familiar aspects of corporate financial structure. The chief conclusion, on the basis of data for 7,828 pension plans sponsored by 1,836 companies and their subsidiaries, is that corporations do not manage the pension plans which they sponsor as if these plans had nothing to do with the corporation. Different responses appear to characterize firms' behavior in different contexts, but the evidence persistently indicates clear relationships between decisions about pension assets and liabilities and decisions about the other assets and liabilities of the firm. At the same time, the pattern of these relation- ships is, more often than not, inconsistent with familiar hypotheses that have emerged thus far in the theoretical literature analyzing pension aspects of corporate finance. Hence the conclusion from the data is also that the connections between pension decisions and corporate financial decisions in the more conventional sense are, at least as yet, not well understood.

Suggested Citation

Friedman, Benjamin M., Pension Funding, Pension Asset Allocation, and Corporate Finance: Evidence from Individual Company Data (August 1982). NBER Working Paper No. w0957. Available at SSRN: https://ssrn.com/abstract=300731

Benjamin M. Friedman (Contact Author)

Harvard University - Department of Economics ( email )

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