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Title: The Corporate Governance of Defined-Benefit Pension Plans: Evidence from the United Kingdom

Author(s): Joâo Francisco P.D. Cocco and Paolo Volpin

Publication Date: February 2005

Keyword(s): corporate governance, defined benefits, insiders, pension plans and pension trustees

Programme Area(s): Financial Economics

Abstract: This paper studies the governance of defined-benefit pension plans in the United Kingdom. We construct a governance measure, equal to the proportion of trustees of the pension plan who are also executive directors of the sponsoring company. Our findings indicate that pension plans of indebted companies with a higher proportion of insider-trustees: (i) invest a higher proportion of the pension plan assets into equities, (ii) contribute less into the pension plan, and (iii) have a larger dividend payout ratio. This evidence supports an agency view, whereby insider-trustees act in the interest of shareholders of the sponsoring company, and not necessarily pension plan members.

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Bibliographic Reference

Cocco, J and Volpin, P. 2005. 'The Corporate Governance of Defined-Benefit Pension Plans: Evidence from the United Kingdom'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4932