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The Impact of 'A - Day' on Executive Pensions and Pay for Performance

Author

Listed:
  • Damon Morris

    (Department of Economics, University of Sheffield)

  • Ian Gregory-Smith

    (Department of Economics, University of Sheffield)

  • Brian Main

    (Business School, University of Edinburgh)

  • Alberto Montagnoli

    (Department of Economics, University of Sheffield)

  • Peter Wright

    (Department of Economics, University of Sheffield)

Abstract

This paper evaluates the impact of the ‘A-day’ pensions simplification legislation introduced in the UK in 2006. This reform exogenously affected the cost of pension provision for firms whose executives had accumulated pensions benefits in excess of the prescribed limit. We find a strong reaction in the form of pension provision in a sample of UK executive directors. After A-day, many executives saw their defined benefit scheme replaced with supplementary cash payments. This had the unintended consequence of significantly decreasing the relationship between executive pay and firm performance for those executives affected by the reform.

Suggested Citation

  • Damon Morris & Ian Gregory-Smith & Brian Main & Alberto Montagnoli & Peter Wright, 2015. "The Impact of 'A - Day' on Executive Pensions and Pay for Performance," Working Papers 2015026, The University of Sheffield, Department of Economics.
    • Handle: RePEc:shf:wpaper:2015026
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    File URL: http://www.sheffield.ac.uk/economics/research/serps/articles/2015_026
    File Function: First version, December 2015
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    References listed on IDEAS

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    Cited by:

    1. Hao Li & Jinsha Zhao, 2020. "Inside debt and firm risk‐taking: Evidence from the UK pension reform," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(9-10), pages 1316-1364, October.

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    More about this item

    Keywords

    Executive compensation; Executive pensions; Pay for Performance; A-day;
    All these keywords.

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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