Company Stock in Pension Funds

William Even () and David Macpherson

National Tax Journal, 2004, vol. 57, issue 2, 299-313

Abstract: This study examines several issues surrounding the tendency for some pension funds to invest in their own company’s stock. After reviewing the existing literature describing the benefits and costs of investing in company stock, the legislative environment surrounding company stock holdings is reviewed. Using data from Internal Revenue Service Form 5500 filings on the pension fund holdings of over 300,000 defined–contribution pension plans in the 1990s, we show that about one out of ten defined–contribution plans invest in their own stock, but about one–third of workers in defined–contribution plans have some company stock in their pension plan. Pension funds are shown to be less likely to invest in company stocks that lead to higher risk that financial markets do not reward. We also find that pensions that hold a larger share of assets in company stock earn a higher average return and a higher variance of returns.

Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:57:y:2004:i:2:p:299-313

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