Why do healthy firms freeze their defined-benefit pension plans?

Atanasova, Christina; Hrazdil, Karel

doi:10.1016/j.gfj.2010.09.006

Cited by 17 publications

(13 citation statements)

References 18 publications

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“…As well, abnormal performance following a freeze is negatively correlated with economic context, as shown by the significant, positive coefficients of the credit risk variable. While others studies have shown that return on equity (ROE) (Milevsky & Song, 2010) or pension fund asset returns are positively correlated with abnormal returns (Atanasova & Hrazdil, 2010), we did not find these variables to be significant.…”

Section: Determinant Factors Of the Effects Of A Pension Fund Freeze contrasting

confidence: 99%

“…In order to understand the determinant factors of abnormal performances and risk variations, we regressed the various measures a E,j , b E,j and ω 1,j over a vector of characteristics relative to the companies, their pension funds, and the economy. We analyzed approximately 15 characteristic variables, but for the purposes of presentation only retained those deemed the most pertinent in previous studies (Atanasova & Hrazdil, 2010;Ferson & Schadt, 1996;Jin et al, 2006;McFarland et al, 2009;Milevsky & Song, 2010;Munnell & Soto, 2007). These variables, as well as their expected impact on both risk and performance, are presented in Appendix 1.…”

Section: Determinant Factors For Abnormal Returns and Risk Variationmentioning

confidence: 99%

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Effects of pension fund freezing on firm performance and risk

2015

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This study considers the effect of freezing defined benefit pension funds on shareholder risk and returns. The conditional models used in this study directly assess the effects of a pension fund freeze on returns and on systematic and residual risk. While pension fund freezes do not significantly affect performance or systematic risk, they do significantly reduce short-term residual risk. Pension fund freezes therefore do not generally present significant financial advantages to shareholders. Only shareholders of firms with pension funds in crisis would benefit from significant systematic risk reductions. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.Keywords: pension funds, conditional models, pension fund freezes, defined benefit pension funds Résumé Cette étude vérifie les effets du gel des caisses de retraite à prestations déterminées d'une entreprise sur la performance et les mesures de risque de ses actionnaires. Notre étude événementielle s'appuie sur des modèles conditionnels qui permettent de mesurer directement les effets du gel sur la performance et les mesures de risque systématique et résiduel. Nos résultats montrent que le gel n'affecte pas significativement la performance ou le risque systématique des entreprises, mais diminue significativement leur risque résiduel à court terme. Par conséquent, le gel d'une caisse de retraite n'engendre généralement pas pour ses actionnaires des avantages financiers notables. Seuls les actionnaires des entreprises dont la caisse est en difficulté profitent d'une diminution significative du risque systématique à la suite d'un gel.

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Section: Determinant Factors Of the Effects Of A Pension Fund Freeze contrasting

confidence: 99%

Section: Determinant Factors For Abnormal Returns and Risk Variationmentioning

confidence: 99%

Effects of pension fund freezing on firm performance and risk

2015

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“…Firms with debt‐contracting problems will probably not be in a position to contribute to the retirement plan. In addition, companies that are more unionized are less likely to freeze a pension plan (Munnell and Soto ; Atanasova and Hrazdil ; Beaudoin et al ; Comprix and Muller ) due to the difficulty of negotiating a plan freeze with the union. Companies with high rates of collective bargaining often use more financial leverage (Matsa ), and because unionization tends to reduce the likelihood of freezing plan benefits, high leverage companies are less likely to freeze their retirement plan.…”

Section: Discussion Of Changes In Retirement Plan Funded Status and Hmentioning

confidence: 99%

“…Companies with a significant union presence are less likely to freeze a retirement plan or reduce retirement benefits (Munnell and Soto ; Atanasova and Hrazdil ; Beaudoin et al ; Comprix and Muller ). Following D'Souza et al , I define the variable UNION it as 1 if greater than 50 percent of the employees belong to a union, and 0 otherwise.…”

Section: Methodsmentioning

confidence: 99%

Changes in the Funded Status of Retirement Plans after the Adoption of SFAS No. 158: Economic Improvement or Balance Sheet Management?

Jones

2013

Contemporary Accting Res

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“…Afin de comprendre les déterminants des performances anormales et des variations de risque, nous régressons les différentes mesures a E, j , b E, j et ω 1, j sur un vecteur de caractéristiques relatives aux entreprises, à leurs caisses de retraite et au contexte économique. Nous avons analysé près d'une quinzaine de variables caractéristiques, mais n'avons retenu pour des fins de présentation que celles proposées comme les plus pertinentes dans la littérature (Atanasova & Hrazdil, 2010;Ferson & Schadt, 1996;Jin et al, 2006;McFarland et al, 2009;Milevsky & Song, 2010;Munnell & Soto, 2007). Ces variables, ainsi que leurs effets attendus tant sur le risque et la performance, sont présentées à l'annexe 1.…”

Section: Déterminants Des Performances Anormales Et Des Variations Deunclassified

Les effets du gel d'une caisse de retraite sur la performance et le risque des entreprises

2015

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This study considers the effect of freezing defined benefit pension funds on shareholder risk and returns. The conditional models used in this study directly assess the effects of a pension fund freeze on returns and on systematic and residual risk. While pension fund freezes do not significantly affect performance or systematic risk, they do significantly reduce short-term residual risk. Pension fund freezes therefore do not generally present significant financial advantages to shareholders. Only shareholders of funds in crisis would benefit from significant systematic risk reductions. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.Keywords: pension funds, conditional models, pension fund freezes, defined benefit pension funds Résumé Cette étude vérifie les effets du gel des caisses de retraite à prestations déterminées d'une entreprise sur la performance et les mesures de risque de ses actionnaires. Notre étude événementielle s'appuie sur des modèles conditionnels qui permettent de mesurer directement les effets du gel sur la performance et les mesures de risque systématique et résiduel. Nos résultats montrent que le gel n'affecte pas significativement la performance ou le risque systématique des entreprises, mais diminue significativement leur risque résiduel à court terme. Par conséquent, le gel d'une caisse de retraite n'engendre généralement pas pour ses actionnaires des avantages financiers notables. Seuls les actionnaires des entreprises dont la caisse est en difficulté profitent d'une diminution significative du risque systématique à la suite d'un gel.

show abstract

Why do healthy firms freeze their defined-benefit pension plans?

Cited by 17 publications

References 18 publications

Effects of pension fund freezing on firm performance and risk

Effects of pension fund freezing on firm performance and risk

Changes in the Funded Status of Retirement Plans after the Adoption of SFAS No. 158: Economic Improvement or Balance Sheet Management?

Les effets du gel d'une caisse de retraite sur la performance et le risque des entreprises

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