Corporate Expenditures and Pension Contributions: Evidence from UK Company Accounts

37 Pages Posted: 30 Dec 2005

See all articles by Philip Bunn

Philip Bunn

Bank of England

Kamakshya Trivedi

Bank of England - Domestic Finance Division

Date Written: October 2005

Abstract

This paper examines how corporate behaviour is related to financial pressure, where the financial pressure is on account of pension contributions to the company pension scheme. Using a large panel of quoted non-financial UK firms from 1983-2002, we estimate generalised methods of moments models for dividends and investment. Our results suggest that dividends are reduced in response to higher pension contributions. There is only weak evidence of any impact on investment. Companies that seek to tackle underfunding of defined benefit pension schemes by raising their contributions could pay lower dividends than they would have otherwise.

Keywords: financial pressure, balance-sheet adjustment, pension contributions

JEL Classification: G35, G31, G23.

Suggested Citation

Bunn, Philip and Trivedi, Kamakshya, Corporate Expenditures and Pension Contributions: Evidence from UK Company Accounts (October 2005). Bank of England Working Paper Series No. 276, Available at SSRN: https://ssrn.com/abstract=872687 or http://dx.doi.org/10.2139/ssrn.872687

Philip Bunn (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Kamakshya Trivedi

Bank of England - Domestic Finance Division ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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