Why do healthy firms freeze their defined-benefit pension plans?
AbstractWe examine the firms' decisions in freezing their defined-benefit pension plans and the effect it has on shareholders' wealth. Plan freezes help relieve sponsors of the implicit promises made to employees regarding future compensation. We find evidence that a pension plan freeze has a positive impact on sponsors' equity returns and credit ratings. Firms that choose to freeze their pension plans experience an increase in equity return and a decrease in the probability of a credit downgrade.
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Bibliographic InfoArticle provided by Elsevier in its journal Global Finance Journal.
Volume (Year): 21 (2010)
Issue (Month): 3 ()
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Web page: http://www.elsevier.com/locate/inca/620162
Defined-benefit pensions Plan freeze Wealth transfer Equity returns Credit ratings;
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