Journal of Pension Economics and Finance

Table of Contents - July 2012 - Volume 11, Issue 03  

Articles

Pension fund finance and sponsoring companies*

E. PHILIP DAVISa1 and LEO DE HAANa2

a1 NIESR, Dean Trench Street, London SW1 (e-mail: e_philip_davis@msn.com)

a2 De Nederlandsche Bank, Economics and Research Division, Amsterdam, The Netherlands (e-mail: l.de.haan@dnb.nl)

Abstract

We present empirical evidence on the funding and portfolio allocation of around 200 Dutch corporate pension funds over the period 1996-2005, with a special focus on the influence of the sponsoring firm. We find that unprofitable and small firms contribute less to their pension funds than profitable and large firms, consistent with theories of capital market imperfections. Sponsor contributions are found to be positively correlated with leverage, suggesting that tax effects play a role. Defined benefit funds invest relatively more in equity and less in bonds than their defined contribution counterparts, which is in accordance with the risk shifting theory.

(Online publication February 17 2012)

JEL CODES:

  • G23;
  • G32

Key Words:

  • Pension funds;
  • sponsoring company;
  • capital structure;
  • asset allocation

Footnotes

* The authors would like to thank two anonymous referees, as well as Jan Marc Berk, Dirk Broeders, Diederik Dicou, Peter Egger, Jakob de Haan, Ronald Mahieu, Sami Vähämaa, Trudy van der Kloet and Peter Vlaar, and participants of the 57th Midwest Finance Association meeting at San Antonio, the Netspar Pension Workshop (The Hague, June 2008), the 66th conference of the International Atlantic Economic Society in Montreal, and seminars at Brunel University and De Nederlandsche Bank for helpful suggestions and comments. Henk van Kerkhoff and Ton Kok provided data. We especially wish to thank Sybille Grob for her input during the first stage of the project.