The effect of regulation on optimal corporate pension risk

• 成果类型: Article
• 署名作者: Love, David A.; Smith, Paul A.; Wilcox, David W.
• 署名单位: Williams College; Federal Reserve System - USA; Federal Reserve System Board of Governors
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.02.016
• 发表日期: 2011
• 页码: 18-35
• 关键词: pensions; bankruptcy; RISK; portfolio choice

摘要

We study firms' pension prefunding and portfolio allocation choices in a model in which firms trade off the need to compensate workers for the financial risk in their pension benefit against the cost advantage that may be gained by exploiting underpriced pension insurance. In the absence of pension insurance, the firm minimizes costs by rendering promised benefits free of risk to workers, who are assumed to be unable to hedge firm-specific risk. Various forms of government intervention, such as benefit guarantees, can alter this outcome dramatically by providing the firm with an incentive to shift risk to other parties. In this case, we find that the firm's decisions depend on, among other influences, the degree of insurance mispricing, the amount of guaranteed benefits, the stringency of minimum funding requirements, and the costs of financial distress. (C) 2011 Elsevier B.V. All rights reserved.