Article
What Drives Corporate Pension Plan Contributions: Moral Hazard or Tax Benefits?
Financial Analysts Journal
Document Type
Article
Publication Date
7-1-2013
Abstract
In testing moral hazard and tax benefit hypotheses regarding defined benefit plan funding and contribution incentives by incorporating sponsors’ bankruptcy risk, the authors proposed that high-bankruptcy-risk sponsors have a strong moral hazard incentive because the put value of the U.S. Pension Benefit Guaranty Corporation guarantee is high. For low-bankruptcy-risk sponsors, the put value is low; maximizing tax benefits associated with pension contributions becomes a powerful incentive. Results based on sponsors’ voluntary contributions support both hypotheses.
Inclusive pages
58-72
ISBN/ISSN
0015-198X
Copyright
Copyright © 2013, Chartered Financial Analyst Institute
Publisher
Chartered Financial Analyst Institute
Peer Reviewed
Yes
Disciplines
Citation Information
Xuanjuan Chen, Tong Yu and Ting Zhang. "What Drives Corporate Pension Plan Contributions: Moral Hazard or Tax Benefits?" Financial Analysts Journal Vol. 69 Iss. 4 (2013) Available at: http://works.bepress.com/ting-zhang/9/
Permission documentation is on file.