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Corporate post-retirement benefit plans and leverage
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Bartram, Söhnke M. (2016) Corporate post-retirement benefit plans and leverage. Review of Finance, 20 (2). pp. 575-629. doi:10.1093/rof/rfv021
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Official URL: https://doi.org/10.1093/rof/rfv021
Abstract
Defined benefit pension and health care plans are important for firm leverage around the world. While consolidating off-balance sheet post-retirement plans increases effective leverage by 32%, firms reduce their level of regular debt by only 22 cents for every dollar of projected benefit obligation, yielding overall 23% higher total leverage of plan sponsors compared with similar firms without post-retirement plans. The most important driver of substitution rates between regular debt and post-retirement obligations is rule of law, followed by labor market freedom and taxes. In contrast, pension guarantee funds and priority of unfunded pension obligations are less important for substitution rates.
| Item Type: | Journal Article | ||||||||
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| Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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| Journal or Publication Title: | Review of Finance | ||||||||
| Publisher: | Oxford University Press | ||||||||
| ISSN: | 1572-3097 | ||||||||
| Official Date: | March 2016 | ||||||||
| Dates: |
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| Volume: | 20 | ||||||||
| Number: | 2 | ||||||||
| Page Range: | pp. 575-629 | ||||||||
| DOI: | 10.1093/rof/rfv021 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Related URLs: |
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