Advanced Search
MyIDEAS: Login to save this paper or follow this series

Defined benefit company pensions and corporate valuations: simulation and empirical evidence from the United Kingdom

Contents:

Author Info

  • Kamakshya Trivedi
  • Garry Young

Abstract

This paper examines the role of defined benefit company pensions in amplifying the effect of common shocks to companies' stock market valuations. It identifies and evaluates the significance of two channels of amplification: cross-holdings of equities in pension schemes, and leverage induced by pension liabilities. Econometric analysis of weekly stock market data for a sample of FTSE 350 UK companies confirm that these effects are statistically significant and robust to outlying observations.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2006/WP289.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of England in its series Bank of England working papers with number 289.

as in new window
Length:
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:boe:boeewp:289

Contact details of provider:
Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Email:
Web page: http://www.bankofengland.co.uk/
More information through EDIRC

Related research

Keywords:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987. "How Does the Market Value Unfunded Pension Liabilities?," NBER Chapters, in: Issues in Pension Economics, pages 81-110 National Bureau of Economic Research, Inc.
  2. Julia Lynn Coronado & Steven A. Sharpe, 2003. "Did pension plan accounting contribute to a stock market bubble?," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2003-38, Board of Governors of the Federal Reserve System (U.S.).
  3. Baiman, Stanley & Verrecchia, Robert E., 1995. "Earnings and price-based compensation contracts in the presence of discretionary trading and incomplete contracting," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 20(1), pages 93-121, July.
  4. E. Philip Davis, 2000. "Regulation of private pensions : a case study of the UK," Revue d'Économie Financière, Programme National Persée, Programme National Persée, vol. 60(5), pages 175-192.
  5. Cocco, Joâo Francisco P.D. & Volpin, Paolo, 2005. "The Corporate Governance of Defined-Benefit Pension Plans: Evidence from the United Kingdom," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4932, C.E.P.R. Discussion Papers.
  6. Bhandari, Laxmi Chand, 1988. " Debt/Equity Ratio and Expected Common Stock Returns: Empirical Evidence," Journal of Finance, American Finance Association, American Finance Association, vol. 43(2), pages 507-28, June.
  7. Martin Feldstein & Randall Morck, 1982. "Pension Funding Decisions, Interest Rate Assumptions and Share Prices," NBER Working Papers 0938, National Bureau of Economic Research, Inc.
  8. Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1.
  9. Andrei Shleifer ad Robert W. Vishny, 1995. "The Limits of Arbitrage," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1725, Harvard - Institute of Economic Research.
  10. Kenneth A. Froot & Andre F. Perold & Jeremy C. Stein, 1991. "Shareholder Trading Practices and Corporate Investment Horizons," NBER Working Papers 3638, National Bureau of Economic Research, Inc.
  11. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 181-205, July.
  12. Zvi Bodie & John B. Shoven & David A. Wise, 1987. "Issues in Pension Economics," NBER Books, National Bureau of Economic Research, Inc, number bodi87-1.
  13. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, American Finance Association, vol. 47(2), pages 427-65, June.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:289. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.