Pension Funding, Pension Asset Allocation, and Corporate Finance: Evidence From Individual Company Data

Benjamin M. Friedman

No 957, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the relationship between U.S. corporations' management of their pension plans and their management of the more familiar aspects of corporate financial structure. The chief conclusion, on the basis of data for 7,828 pension plans sponsored by 1,836 companies and their subsidiaries, is that corporations do not manage the pension plans which they sponsor as if these plans had nothing to do with the corporation. Different responses appear to characterize firms' behavior in different contexts, but the evidence persistently indicates clear relationships between decisions about pension assets and liabilities and decisions about the other assets and liabilities of the firm. At the same time, the pattern of these relation- ships is, more often than not, inconsistent with familiar hypotheses that have emerged thus far in the theoretical literature analyzing pension aspects of corporate finance. Hence the conclusion from the data is also that the connections between pension decisions and corporate financial decisions in the more conventional sense are, at least as yet, not well understood.

Date: 1982-08
Note: ME PE
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Published as Friedman, Benjamin M. "Pension Funding, Pension Asset Allocation, and Corporate Finance: Evidence from Individual Company Data." Financial Aspects ofthe U.S. Pension System, edited by Zvi Bodie and John B. Shoven. Chicago: UCP, (1984), pp. 107-147.
Published as Pension Funding, Pension Asset Allocation, and Corporate Finance: Evidence from Individual Company Data , Benjamin M. Friedman. in Financial Aspects of the United States Pension System , Bodie and Shoven. 1983

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