Journal article
Investment policies and risk sharing by corporate pensions
Journal of economic dynamics & control, Vol.165, 104891
08/2024
DOI: 10.1016/j.jedc.2024.104891
Abstract
Using a corporate risk management model, we show that the investment risk sharing features of defined benefit corporate pensions help explain their aggressive investment policies as well as their diminishing popularity over time. For reasonable parameter values, the model successfully captures key empirical patterns including pension asset allocation and the relations among pension investment risk, corporate bankruptcy probability, and pension funding. Consistent with the observed trend, we find that switching from defined-benefit plans to defined-contribution plans enhances risk transfer and reduces firms' pension funding costs.
Details
- Title: Subtitle
- Investment policies and risk sharing by corporate pensions
- Creators
- C. Wei Li - University of IowaTong Yao - University of IowaJie Ying - Southern Illinois University Edwardsville
- Resource Type
- Journal article
- Publication Details
- Journal of economic dynamics & control, Vol.165, 104891
- Publisher
- Elsevier B.V
- DOI
- 10.1016/j.jedc.2024.104891
- ISSN
- 0165-1889
- eISSN
- 1879-1743
- Language
- English
- Date published
- 08/2024
- Academic Unit
- Finance
- Record Identifier
- 9984643652202771
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