The Corporate Governance of Defined Benefit Pension Plans: Evidence from the United Kingdom

43 Pages Posted: 23 Feb 2005

See all articles by Joao F. Cocco

Joao F. Cocco

London Business School; Centre for Economic Policy Research (CEPR)

Paolo F. Volpin

City University London - Faculty of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2005

Abstract

This paper studies the governance of defined-benefit pension plans in the United Kingdom. We construct a governance measure, equal to the proportion of trustees of the pension plan who are also executive directors of the sponsoring company. Our findings indicate that pension plans of indebted companies with a higher proportion of insider-trustees: (i) invest a higher proportion of the pension plan assets into equities, (ii) contribute less into the pension plan, and (iii) have a larger dividend payout ratio. This evidence supports an agency view, whereby insider-trustees act in the interest of shareholders of the sponsoring company, and not necessarily pension plan members.

Keywords: Defined benefits, pension plans, insiders, corporate governance, pension trustees

JEL Classification: G23, G34

Suggested Citation

Cocco, João F. and Volpin, Paolo F., The Corporate Governance of Defined Benefit Pension Plans: Evidence from the United Kingdom (March 2005). ECGI - Finance Working Paper No. 76/2005. Available at SSRN: https://ssrn.com/abstract=670685 or http://dx.doi.org/10.2139/ssrn.670685

João F. Cocco

London Business School ( email )

Sussex Place
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London, London NW1 4SA
United Kingdom
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Paolo F. Volpin (Contact Author)

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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