Corporate governance and shareholder-employee risk-shifting: Evidence from corporate pension plan sponsors

Shingo Goto and Noriyoshi Yanase

Finance Research Letters, 2023, vol. 58, issue PA

Abstract: This study examines how corporate governance affects pension plan sponsors’ conflicting motives—risk-shifting vs. risk management—and their future pension funding status, R&D investments, and shareholder values. We focus on managers’ discretionary choices of expected rates of return on plan assets and discount rates for pension liabilities to capture risk-shifting motives and measure corporate governance quality through foreign equity ownership (strong monitoring) and stable equity ownership (weak monitoring). The evidence shows that well-governed firms use managerial risk-shifting to finance R&D and increase shareholder values. Risk-shifting by poorly-governed firms results in larger pension underfunding without increasing shareholder values.

Keywords: Corporate governance; Corporate pensions; Ownership structure; Risk Shifting; R&D; Internal Financing (search for similar items in EconPapers)
JEL-codes: G22 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pa:s1544612323006517

DOI: 10.1016/j.frl.2023.104279

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