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Funding Status Of Defined Benefit Pension Plans And Idiosyncratic Return Volatility

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  • Yangyang Chen

Abstract

type="main" xml:lang="en"> In this article, I explore how the funding status of a sponsoring firm's defined benefit pension plans affects its idiosyncratic volatility. Using a large sample of U.S. firms from 1980 to 2010, I document a positive and significant relation between pension deficits and idiosyncratic volatility. The relation is stronger for firms that are financially constrained and that have a worse information environment. The findings are consistent with the argument that large pension deficits generate greater risk for the firm's future operations and financing, and deteriorate its financial disclosure quality, which raises firm idiosyncratic volatility.

Suggested Citation

  • Yangyang Chen, 2015. "Funding Status Of Defined Benefit Pension Plans And Idiosyncratic Return Volatility," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 38(1), pages 35-57, March.
  • Handle: RePEc:bla:jfnres:v:38:y:2015:i:1:p:35-57
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    Cited by:

    1. Sheng-Syan Chen & Chia-Wei Huang & Chuan-Yang Hwang & Yanzhi Wang, 2022. "Voluntary disclosure and corporate innovation," Review of Quantitative Finance and Accounting, Springer, vol. 58(3), pages 1081-1115, April.
    2. Almaghrabi, Khadija S., 2023. "Nonā€operating risk and cash holdings: Evidence from pension risk," Journal of Banking & Finance, Elsevier, vol. 152(C).

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