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Article
What Drives Corporate Pension Plan Contributions: Moral Hazard or Tax Benefits?
Financial Analysts Journal
  • Xuanjuan Chen, Shanghai Finance University
  • Tong Yu, University of Rhode Island
  • Ting Zhang, University of Dayton
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
Comments

Permission documentation is on file.

Publisher
Chartered Financial Analyst Institute
Peer Reviewed
Yes
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/