Defined Benefit Pension De-Risking and Corporate Risk Taking

Financial Management, (February 10, 2021),

Posted: 4 Oct 2019 Last revised: 22 Feb 2021

See all articles by Brian Silverstein

Brian Silverstein

Kansas State University - Department of Finance

Date Written: August 20, 2019


U.S. corporate sponsors of defined benefit (DB) pension plans in recent years have been de‐risking by paying premiums to transfer their pension plan assets and liabilities to the balance sheets of third‐party insurers. The passage of the Moving Ahead for Progress in the 21st Century Act (MAP‐21) in 2012 provided the pension funding relief necessary to make de‐risking a mainstream corporate activity. This study provides the first empirical analysis of plan and firm factors that cause a firm to de‐risk its DB pension plans. We find a positive association between de‐risking and aggregate corporate risk taking. The results also show that de‐risking, on average, has a stronger effect on corporate financing policy than investment policy, leading to an increase in credit risk reflected in a firm's credit rating and cost of debt. Also, we present suggestive evidence that the reallocation of pension risk increases firm idiosyncratic risk and excess returns.

Keywords: Pensions, Risk Management, Pension De-Risking, Pension Freezes, Pension Cost, Retirement, Labor Compensation, Firm Value, Corporate Investment Policy, Corporate Divestiture

JEL Classification: G22, G23, G32, J31, J32, J33

Suggested Citation

Silverstein, Brian, Defined Benefit Pension De-Risking and Corporate Risk Taking (August 20, 2019). Financial Management, (February 10, 2021),, Available at SSRN: or

Brian Silverstein (Contact Author)

Kansas State University - Department of Finance ( email )

Manhattan, KS 66506
United States

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