IDEAS home Printed from https://ideas.repec.org/a/bco/mbrqaa/v14y2020p61-77.html
   My bibliography  Save this article

Financial Actuarial Assumptions: Empirical Study of How Brazilian Companies Manage Their Defined Benefit Plans

Author

Listed:
  • João Evangelista de Souza Neto

    (Fucape Business School, Brazil)

  • Fernando Caio Galdi

    (Fucape Business School, Brazil)

Abstract

This study investigates the factors that Brazilian companies use to manage their defined benefit plans, specifically the determinants of the three financial actuarial assumptions: discount rate, expected return on assets and compensation growth rate. The focus of this research is the companies listed on the B3 – Brazilian Stock Exchange - that recognized and disclosed, from 2010 to 2017, post-employment benefit characterized as Defined Benefit (DB). The sample containing 296 firm/year was divided into two subgroups considering the firm’s political connections. The results suggest that politically connected companies are less effective in managing the solvency of funds or, according to Kido, Petacchi and Weber (2012) act intentionally to justify the company's financial stress. The year before the elections proved to be the most relevant period of discretion, while the specific year of the electoral election only influences the determination of the actuarial financial premises in politically connected companies and, just like in Naughton, Petacchi and Weber (2015) the manager acts to improve the solvency (reduce the deficit) of the pension fund in these periods. The hypothesis that politically connected companies have an incremental adjustment in actuarial assumptions in electoral years has shown results consistent with the theory suggesting that this group of companies manages the reduction of the actuarial deficit in election times more incisively

Suggested Citation

  • João Evangelista de Souza Neto & Fernando Caio Galdi, 2020. "Financial Actuarial Assumptions: Empirical Study of How Brazilian Companies Manage Their Defined Benefit Plans," European Journal of Studies in Management and Business, EUROKD, vol. 14, pages 61-77.
    • Handle: RePEc:bco:mbrqaa::v:14:y:2020:p:61-77
    DOI: 10.32038/mbrq.2020.14.05
    as

    Download full text from publisher

    File URL: https://api.eurokd.com/Uploads/Article/420/mbrq.2020.14.05.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.32038/mbrq.2020.14.05?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Yong Li & Paul Klumpes, 2013. "Determinants of expected rate of return on pension assets: evidence from the UK," Accounting and Business Research, Taylor & Francis Journals, vol. 43(1), pages 3-30, February.
    2. An, Heng & Huang, Zhaodan & Zhang, Ting, 2013. "What determines corporate pension fund risk-taking strategy?," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 597-613.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Li, Yong & Henry, Darren, 2022. "Corporate risk management and pension investment policy," European Management Journal, Elsevier, vol. 40(4), pages 590-605.
    2. Boon, L.N. & Brière, M. & Rigot, S., 2018. "Regulation and pension fund risk-taking," Journal of International Money and Finance, Elsevier, vol. 84(C), pages 23-41.
    3. Jorma J. Schäublin, 2022. "Swiss pension funds: funding ratio, discount rate, and asset allocation," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-23, December.
    4. Almaghrabi, Khadija S., 2023. "Non‐operating risk and cash holdings: Evidence from pension risk," Journal of Banking & Finance, Elsevier, vol. 152(C).
    5. Romaniuk, Katarzyna, 2019. "Premiums of the Pension Benefit Guarantee Corporation and risk-taking by pension plans," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 301-307.
    6. Zhao, Zucheng & Sutcliffe, Charles, 2024. "Why are pension schemes frozen, and how does a freeze affect the Employer's risk?," International Review of Economics & Finance, Elsevier, vol. 94(C).
    7. Kusano, Masaki, 2023. "Does recognition versus disclosure of pension liabilities affect credit ratings? Evidence from Japan," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 50(C).
    8. Wang, Yong & Mao, Connie X., 2015. "Shareholder activism of public pension funds: The political facet," Journal of Banking & Finance, Elsevier, vol. 60(C), pages 138-152.
    9. Masaki KUSANO, 2022. "Recognition versus Disclosure and Managerial Discretion: Evidence from Japanese Pension Accounting," Discussion papers e-22-008, Graduate School of Economics , Kyoto University.
    10. Li, C. Wei & Yao, Tong & Ying, Jie, 2024. "Investment policies and risk sharing by corporate pensions," Journal of Economic Dynamics and Control, Elsevier, vol. 165(C).
    11. Justin Chircop & Paraskevi Vicky Kiosse, 2024. "Does the Publication or the Implementation of IAS 19(R) Have Real Economic Consequences?," Abacus, Accounting Foundation, University of Sydney, vol. 60(4), pages 777-815, December.
    12. Garman, Amy D. & Kubick, Thomas R., 2025. "Mitigating risk-shifting in corporate pension plans: Evidence from stakeholder constituency statutes," Journal of Accounting and Economics, Elsevier, vol. 79(1).
    13. Emawtee Bissoondoyal‐Bheenick & Robert Brooks & Hung Xuan Do, 2023. "Risk Analysis of Pension Fund Investment Choices," Abacus, Accounting Foundation, University of Sydney, vol. 59(3), pages 872-898, September.
    14. Platanakis, Emmanouil & Sutcliffe, Charles, 2016. "Pension scheme redesign and wealth redistribution between the members and sponsor: The USS rule change in October 2011," Insurance: Mathematics and Economics, Elsevier, vol. 69(C), pages 14-28.
    15. Mauro Mastrogiacomo & Yue Li & Rik Dillingh, 2022. "The displacement effect of compulsory pension savings on private savings. Evidence from the Netherlands, using pension funds supervisory data," Working Papers 474, DNB.
    16. Martijn Boermans & Rients Galema, 2017. "Pension funds carbon footprint and investment trade-offs," DNB Working Papers 554, Netherlands Central Bank, Research Department.
    17. Douglas Cumming & Fanyu Lu & Limin Xu & Chia-Feng (Jeffrey) Yu, 2024. "Are Companies Offloading Risk onto Employees in Times of Uncertainty? Insights from Corporate Pension Plans," Journal of Business Ethics, Springer, vol. 195(3), pages 579-598, December.
    18. Broeders, Dirk W.G.A. & van Oord, Arco & Rijsbergen, David R., 2016. "Scale economies in pension fund investments: A dissection of investment costs across asset classes," Journal of International Money and Finance, Elsevier, vol. 67(C), pages 147-171.
    19. Fahad, Nafiz & Ma, Nelson & Scott, Tom, 2020. "The consequences of discount rate selection for defined benefit liabilities," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    20. Mary McCarthy & Elisabeta Pana & Andrew Weinberger, 2021. "The role of institutional investors in pension risk transfers," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(3), pages 451-468, July.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bco:mbrqaa::v:14:y:2020:p:61-77. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sara Gunen (email available below). General contact details of provider: .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.