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Corporate expenditures and pension contributions: evidence from UK company accounts

Listed author(s):
  • Philip Bunn
  • Kamakshya Trivedi

This paper examines how corporate behaviour is related to financial pressure, where the financial pressure is on account of pension contributions to the company pension scheme. Using a large panel of quoted non-financial UK firms from 1983-2002, we estimate generalised methods of moments models for dividends and investment. Our results suggest that dividends are reduced in response to higher pension contributions. There is only weak evidence of any impact on investment. Companies that seek to tackle underfunding of defined benefit pension schemes by raising their contributions could pay lower dividends than they would have otherwise.

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File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2005/WP276.pdf
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Paper provided by Bank of England in its series Bank of England working papers with number 276.

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Date of creation: Oct 2005
Handle: RePEc:boe:boeewp:276
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