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Corporate Pension Plans

Author

Listed:
  • João F. Cocco

    (Department of Finance, London Business School, Regent's Park, London NW1 4SA, United Kingdom
    Centre for Economic Policy Research, London EC1V 3PZ, England
    Center for Financial Studies, Goethe University, Frankfurt 60323, Germany
    Network for Studies on Pensions, Aging and Retirement, Tilburg University, Tilburg 5037 AB, the Netherlands)

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

  • João F. Cocco, 2014. "Corporate Pension Plans," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 163-184, December.
    • Handle: RePEc:anr:refeco:v:6:y:2014:p:163-184
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-financial-110613-034440
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    More about this item

    Keywords

    defined-benefit; risk-shifting; risk management; implicit contracts; corporate finance;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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