The Corporate Governance of Defined Benefit Pension Plans: Evidence from the United Kingdom
43 Pages Posted: 23 Feb 2005
There are 2 versions of this paper
The Corporate Governance of Defined Benefit Pension Plans: Evidence from the United Kingdom
The Corporate Governance of Defined-Benefit Pension Plans: Evidence from the United Kingdom
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: Suggested Citation
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