Corporate Pension Plans

Posted: 25 Nov 2014

See all articles by Joao F. Cocco

Joao F. Cocco

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

Date Written: December 2014

Abstract

This article reviews the rich and vast literature on defined-benefit (DB) corporate pension plans. The analysis of how firms react to the taxation and regulation of pension plans and to the guarantees provided by the government has allowed researchers to test alternative corporate finance theories, including risk-shifting and risk management. The difficulty in measuring the value of pension liabilities has motivated the study of whether such liabilities are reflected in the cost of capital and in the value of sponsoring firms. The study of the sponsoring firms’ reaction to mandatory pension contribution has provided evidence on financing constraints and on the free-cash-flow hypothesis. Pension plan terminations and freezes have shed light on the nature of the employment contract between the firm and workers.

Suggested Citation

Cocco, João F., Corporate Pension Plans (December 2014). Annual Review of Financial Economics, Vol. 6, pp. 163-184, 2014, Available at SSRN: https://ssrn.com/abstract=2530470 or http://dx.doi.org/10.1146/annurev-financial-110613-034440

João F. Cocco (Contact Author)

London Business School ( email )

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Centre for Economic Policy Research (CEPR)

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