Tax Aspects of Corporate Pension Funding Policy
This paper explores four models of firms' pension liabilities. All of the models yield the result that if it is the stockholders who gain or lose from a change in the market value of pension fund assets, a pension fund invested entirely in bonds will maximize that gain. If a firm's pension liabilities are considered to be no more than the present value of accrued benefits, then most plans for salaried employees would maximize the pension's value by having their assets entirely in bonds. However, for less well funded plans such as most union plans, holding both stocks and bonds or even all stocks may maximize the value of the firm.. Implicit contracts on the liability side of the pension balance sheet can encourage holding some stock, but implicit contracts on the asset side are likely to encourage increased bond holdings.
|Date of creation:||Jul 1981|
|Date of revision:|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Feldstein & Lawrence H. Summers, 1979.
"Inflation and the Taxation of Capital Income in the Corporate Sector,"
NBER Working Papers
0312, National Bureau of Economic Research, Inc.
- Martin Feldstein & Lawrence Summers, 1983. "Inflation and the Taxation of Capital Income in the Corporate Sector," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 116-152 National Bureau of Economic Research, Inc.
- Tepper, Irwin, 1981. "Taxation and Corporate Pension Policy," Journal of Finance, American Finance Association, vol. 36(1), pages 1-13, March.
- Irwin Tepper, 1981. "Taxation and Corporate Pension Policy," NBER Working Papers 0661, National Bureau of Economic Research, Inc.
- Jeremy I. Bulow, 1979. "Analysis of Pension Funding Under Erisa," NBER Working Papers 0402, National Bureau of Economic Research, Inc.
- Robert C. Merton, 2005.
"Theory of rational option pricing,"
World Scientific Book Chapters,
in: Theory Of Valuation, chapter 8, pages 229-288
World Scientific Publishing Co. Pte. Ltd..
- Sharpe, William F., 1976. "Corporate pension funding policy," Journal of Financial Economics, Elsevier, vol. 3(3), pages 183-193, June.
- Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0724. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.