This paper develops a general continuous-time framework for defining the optimal corporate pension policy for defined benefit (DB) plans in the presence of PBGC insurance. Interactions between the firm's optimal investment and financing policies and the optimal portfolio strategy for DB plans...

We exploit an exogenous, universal increase in discount rates mandated by the Moving Ahead for Progress Act (MAP-21) to identify the impact of pension overhang on investment. We find that firms with large unfunded pension liabilities increase investment by 13% after the MAP-21 induced decrease...

UK companies have been making large contributions to reduce the deficits of their pension funds, and are believed to fund such contributions in part by reducing dividends. Using data from 2003-16, we find little evidence that large deficit-reduction contributions are associated with reductions...

In 2012, Congress passed Moving Ahead for Progress in the 21st Century (“MAP-21”), which changed the ERISA pension funding rules such that mandatory pension contributions decreased. Advocates for the bill argued that reducing mandatory contributions would increase firms' investment. In...

We exploit pension funding relief enacted in 2012 to estimate the effects of a positive shock to internal liquidity on market prices and investment. Measuring unexpected increases in internal liquidity using a priori expected pension contributions disclosed under FAS132R, we report positive...

This paper investigates the impacts of defined-benefit (DB) pension plans on the corporate investment choices between diversifying and non-diversifying investments. We find a firm’s DB plan coverage is negatively associated with its propensity of making a major investment. Subject to a major...