Institutional Investor Ownership and Corporate Pension Transparency

Tim V. Eaton, John R. Nofsinger and Abhishek Varma

Financial Management, 2014, vol. 43, issue 3, 603-630

Abstract: type="main">

We examine the association between institutional ownership and defined benefit (DB) pension decisions. We find that institutional ownership is negatively associated with pension underfunding, opportunistic increases in the expected rate of return assumption in the presence of underfunding, and significant ownership of the firm's own stock in the DB plan portfolio. Furthermore, these relations are stronger when institutional ownership is concentrated, when institutions are nontransient investors, or when institutions are relatively large. These results suggest that institutional investors are monitoring firm pension decisions, particularly those institutions with stronger monitoring incentives or resources.

Date: 2014
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