Financial Flexibility and Tax Incentives: Evidence from Defined Benefit Corporate Pension Plans in Japan

Shingo Goto () and Noriyoshi Yanase ()
Additional contact information
Shingo Goto: Moore School of Business, University of South Carolina, 1795 College St., Columbia, SC 29208, U.S.A.
Noriyoshi Yanase: Faculty of Business Administration, Tokyo Keizai University, 1-7-34 Minami-cho, Kokubunji, Tokyo 1858502, Japan.

The Geneva Papers on Risk and Insurance - Issues and Practice, 2013, vol. 38, issue 4, 753-776

Abstract: Contrary to the objective of a major corporate pension reform in Japan to enhance retirement income security, and despite the increased relative tax benefits of externally-funded plans, the number of firms that do not sponsor externally-funded defined benefit plans or defined contribution plans has been increasing steadily. We study the common characteristics of firms sponsoring only traditional internally-funded lump sum plans that provide only weak protection of the employees’ retirement benefits. We find that smaller firms with higher growth prospects (price-to-book ratios) and a younger workforce are less likely to adopt externally-funded plans and more likely to terminate them when they have one. Firms sponsoring only internally-funded plans tend to exhibit lower profitability than their peers with otherwise similar characteristics. These results suggest that smaller firms with higher growth prospects and a younger workforce tend to have stronger incentives to ensure financial flexibility by providing only weak protection of their employees’ retirement benefits.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.palgrave-journals.com/gpp/journal/v38/n4/pdf/gpp201323a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/gpp/journal/v38/n4/full/gpp201323a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

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:pal:gpprii:v:38:y:2013:i:4:p:753-776

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41288/PS2

Access Statistics for this article

The Geneva Papers on Risk and Insurance - Issues and Practice is currently edited by Christophe Courbage

More articles in The Geneva Papers on Risk and Insurance - Issues and Practice from Palgrave Macmillan, The Geneva Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().