Why do healthy firms freeze their defined-benefit pension plans?

Christina Atanasova and Karel Hrazdil

Global Finance Journal, 2010, vol. 21, issue 3, 293-303

Abstract: We examine the firms' decisions in freezing their defined-benefit pension plans and the effect it has on shareholders' wealth. Plan freezes help relieve sponsors of the implicit promises made to employees regarding future compensation. We find evidence that a pension plan freeze has a positive impact on sponsors' equity returns and credit ratings. Firms that choose to freeze their pension plans experience an increase in equity return and a decrease in the probability of a credit downgrade.

Keywords: Defined-benefit; pensions; Plan; freeze; Wealth; transfer; Equity; returns; Credit; ratings (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:21:y:2010:i:3:p:293-303

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