Risk Shifting versus Risk Management: Investment Policy in Corporate Pension Plans / Joshua Rauh.

Format:

Book

Author/Creator:

Rauh, Joshua.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13240.

NBER working paper series no. w13240

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Risk Shifting versus Risk Management

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2007.

Summary:

The asset allocation of defined benefit pension plans is a setting where both risk shifting and risk management incentives are likely be present. Empirically, firms with poorly funded pension plans and weak credit ratings allocate a greater share of pension fund assets to safer securities such as government debt and cash, whereas firms with well-funded pension plans and strong credit ratings invest more heavily in equity. These relations hold both in the cross-section and within firms and plans over time. The incentive to limit costly financial distress plays a considerably larger role than risk shifting in explaining variation in pension fund investment policy among U.S. firms.

Notes:

Print version record

July 2007.