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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 ISSN 1572-3097.
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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 | ||||||||
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