Corporate Pensions and the Maturity Structure of Debt

Yijia Lin, Sheen Liu and Jifeng Yu

Journal of Risk & Insurance, 2019, vol. 86, issue 2, 315-350

Abstract: In this article, we investigate the role of pension obligations, the most significant off‐balance‐sheet item, in determining corporate debt maturity and spreads. We begin by showing a significant and robust positive relationship between pension liabilities and corporate short‐term debt ratio. We also find that more pension obligations cause a significant increase in the cost of debt, but this effect is mitigated by short‐maturity debt. Overall, our study shows that short‐term debt can reduce asymmetric information costs related to pensions.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jrinsu:v:86:y:2019:i:2:p:315-350

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