Defined benefit company pensions and corporate valuations: simulation and empirical evidence from the United Kingdom
AbstractThis 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.
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Date of creation: Mar 2006
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-30 (All new papers)
- NEP-FMK-2006-09-30 (Financial Markets)
- NEP-RMG-2006-09-30 (Risk Management)
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