Why do firms retain their defined benefit plans? Evidence from the UK

Accounting

Speaker:Evisa Mitrou, University of Exeter
Date: Wednesday 28 January 2015
Time: 14:00 - 15:30
Location: Building One: Constantine Leventis

Further details

Abstract:

I examine the effect that managements’ membership in the firms’ defined benefit pension (DB) plan in the same terms as the rest of the employees affects the firms’ decision to retain DB plans open in a sample of UK firms for the period 2000-2013. In addition, I examine the incentive to attract and retain highly skilled employees as a possible determinant of companies’ decision to continue to sponsor DB plans. I find that firms that retain their DB plans have management with membership in the company’s DB plan and also are companies that require highly skilled employees.  Furthermore, for a smaller sample of companies I find evidence that firms with insider trustees (trustees that are also company executives) are more likely to retain their DB plans reflecting in this way higher ability of risk management in corporate pension decisions. This finding is driven primarily by CFO trustees than a CEO trustees suggesting that pension decisions fall into CFO’s expertise.