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Pension plan risk-taking: does it matter if the sponsor is publicly-traded?

Published online by Cambridge University Press:  12 November 2012

CHRISTINA ATANASOVA  and
EVAN GATEV
CHRISTINA ATANASOVA*
Affiliation:
Beedie school of Business, Simon Fraser University, 8888 University Drive, Burnaby, V5A 156, Canada
EVAN GATEV*
Affiliation:
Beedie school of Business, Simon Fraser University, 8888 University Drive, Burnaby, V5A 156, Canada
*
(e-mail: cva3@sfu.ca
ega8@sfu.ca)
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Abstract

We use a large sample of defined benefit (DB) pension plans to document economically significant differences in the risk-taking of plans sponsored by privately-held versus publicly-traded firms. The magnitude and the main determinants of pension plan risk-taking are different for public and private firms. The effect of pension liabilities’ funded status on risk-taking is two and a half times higher for plans with publicly-traded sponsors than for plans with private sponsors. In contrast, changing sponsor contributions has more than four times higher effect on risk-taking for plans with private sponsors. The results suggest that the alignment of incentives for the stakeholders in a pension contract is different for plans sponsored by private versus publicly-traded firms.

Keywords

Risk-takingpension plansownership
Type
Articles
Information
Journal of Pension Economics & Finance , Volume 12 , Issue 2 , April 2013 , pp. 218 - 249
Copyright
Copyright © Cambridge University Press 2012

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