Pay me now (and later): Pension benefit manipulation before plan freezes and executive retirement

Irina Stefanescu, Yupeng Wang, Kangzhen Xie and Jun Yang

Journal of Financial Economics, 2018, vol. 127, issue 1, 152-173

Abstract: Large US firms modify top executives’ compensation before pension-related events. Top executives receive one-time increases in pensionable earnings through higher annual bonuses one year before a plan freeze and one year before retirement. Firms also boost pension payouts by lowering plan discount rates when top executives are eligible to retire with lump-sum benefit distributions. Increases in executive pensions do not appear to be an attempt to improve managerial effort or retention and are more likely to occur at firms with poor corporate governance. These findings suggest that in some circumstances managers are able to extract rents through their pension plans.

Keywords: Corporate governance; Executive annual bonuses; Defined benefit pension plans; Pension freezes; Executive retirement (search for similar items in EconPapers)
JEL-codes: G31 G32 G34 M40 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:127:y:2018:i:1:p:152-173

DOI: 10.1016/j.jfineco.2017.10.006

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