Corporate risk management and pension investment policy

Yong Li and Darren Henry

European Management Journal, 2022, vol. 40, issue 4, 590-605

Abstract: In this paper, we study whether firms manage their pension risk exposures within an integrated corporate risk management framework or they manage their pension and firm risk exposures independently following the adoption of fair value pension reporting regulation (IAS 19). Controlling for known factors affecting the risk-taking in pension plan investments, we document a robust negative association both at the cross-section and over time between pension risk and firm systematic risk and operating asset risk during the post-IAS 19 adoption period. The findings suggest that firms manage pension risk as an integral part of firm risk, consistent with a coordinated risk management explanation. Overall, our evidence highlights that pension investment strategy is a dynamic process that is ultimately determined by sponsoring firms' strategic corporate risk management considerations and the important role that changing pension reporting regulation plays in shaping these dynamics. Our conclusions have potential wider implications for ongoing reforms in financial reporting and disclosure policy settings.

Keywords: Pension risk; Fair-value; Pension reporting; Corporate risk management (search for similar items in EconPapers)
JEL-codes: J53 M41 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0263237321001195
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eurman:v:40:y:2022:i:4:p:590-605

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/115/bibliographic
http://www.elsevier. ... me/115/bibliographic

DOI: 10.1016/j.emj.2021.09.003

Access Statistics for this article

European Management Journal is currently edited by Michael Haenlein

More articles in European Management Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().