Menu Effects of Retirement Pension Plans: The Impact of Equity Exposure on Equity Allocation

2019 ◽  
Vol 33 (3) ◽  
pp. 21-50
Author(s):  
Jongwon Bae ◽  
Inwook Song ◽  
Kyonghee Lee
2009 ◽  
Vol 84 (5) ◽  
pp. 1553-1573 ◽  
Author(s):  
Paul Kalyta

ABSTRACT: Empirical research on the impact of managerial retirement on discretionary accounting choices is inconclusive, with most studies finding no evidence of earnings management in the pre-retirement period. I argue that income-increasing accounting choices in final pre-retirement years are particularly appealing to managers whose pension depends on firm performance in these years. Using primary data on retired CEOs of Fortune 1000 firms, I investigate the impact of CEO pension plans on discretionary accruals. Consistent with the prediction, I find evidence of income-increasing earnings management in the pre-retirement period only when CEO pension is based on firm performance. I also report evidence of negative abnormal market reaction to CEO retirement in firms with performance-contingent CEO pensions.


2010 ◽  
Vol 9 (4) ◽  
pp. 481-503 ◽  
Author(s):  
IRENA DUSHI ◽  
LEORA FRIEDBERG ◽  
TONY WEBB

AbstractWe calculate the risk faced by defined benefit plan providers arising from uncertain aggregate mortality – the risk that the average participant will live longer than expected. First, comparing the widely cited Lee–Carter model to industry benchmarks that are commonly employed by plan providers, we show that these benchmarks appear to substantially underestimate longevity. The resultant understatement of liabilities may reach 12.2% for typical male participants in defined benefit plans and may reach 22.4% for male workers aged 22. Next, we consider consequences for plan liabilities if aggregate mortality declines unexpectedly faster than is predicted by a putatively unbiased projection. There is a 5% chance that liabilities of a terminated plan would be 3.1% to 5.3% higher than what is expected, depending on the mix of workers covered.


2016 ◽  
Vol 8 (2) ◽  
pp. 142-162
Author(s):  
Paula Diane Parker ◽  
Nancy J. Swanson ◽  
Michael T. Dugan

Purpose This study aims to examine the unexpected portion of the pension discount rate to determine if the pension discount rate is being used to manage earnings for both financially healthy and financially unhealthy firms as categorized based upon their Altman z-score for bankruptcy. Design/methodology/approach Regression analysis is conducted with the unexpected portion of the pension discount rate as the dependent variable and various metrics indicating potential firm strengths and weaknesses as the independent variables. Findings This study finds evidence that suggests managers for both groups of firms are using their choice of discount rate to manage bottom-line earnings. These findings highlight the patterns of various firm choice differences found between the two groups and the magnitude of the differences between the groups. Originality/value Three streams of literature are considered in this research: earnings management, defined pension plans and z-score bankruptcy. This study extends prior research by examining the unexpected portion of the pension discount rate based on the z-score determination of whether a firm is considered financially healthy or financially unhealthy. Our findings highlight the impact of various firm choice differences found between the two groups of firms.


2016 ◽  
Vol 45 (4) ◽  
pp. 709-728 ◽  
Author(s):  
ERIC BREIT ◽  
TONE ALM ANDREASSEN ◽  
ROBERT H. SALOMON

AbstractThe literature on policy implementation is divided with regards to the impact of street-level bureaucrats on the implementation of public policies. In this paper, we aim to add to and nuance these debates by focusing on ‘institutional work’ – i.e. the creation, maintenance and disruption of institutions – undertaken by central authorities and street-level bureaucrats during public reform processes. On the basis of a case study of the organisational implementation of a retirement pension reform in the Norwegian Labor and Welfare Administration, we argue that institutional work is a useful heuristic device for conceptualising the variety of responses available to street-level bureaucrats during public reforms. We also argue that the responses demonstrate the impact of street-level bureaucrats in these reforms in the context of managerial control and regulation. Finally, we argue that the effectiveness of policy change is dependent on the institutional work of street-level bureaucrats and, in particular, on institutional work that supports the institutions created by politicians and public administrations.


2019 ◽  
Vol 37 (6) ◽  
pp. 1419-1440
Author(s):  
Milagros Vivel-Búa ◽  
Lucía Rey-Ares ◽  
Rubén Lado-Sestayo ◽  
Sara Fernández-López

PurposeThe purpose of this paper is to study the driving forces of both the decision to participate in individual pension plans and the amount of money allocated to such plans. Moreover, this paper evaluates the potential role that income plays, which has not previously been considered in depth in the financial literature.Design/methodology/approachBased on a sample of the Spanish population over the period 2008–2015, this paper estimates probit and tobit models, using 165,791 observations. The driving forces of private retirement savings comprise demographic, financial and socio-economic characteristics.FindingsThis paper confirms the impact of socio-demographic and economic variables on participation and monetary contributions to pension plans. It also confirms that income plays a non-negligible role. Moreover, empirical evidence reveals that the effect of gender is related to the income stratum to which the individual belongs.Originality/valueRetirement planning plays a key role in retirees’ future income and several countries have emphasised the importance of private individual savings to supplement the minimum provided by public pension schemes. The previous literature has concluded that those who plan their retirement end their working lives with three times the wealth of non-planners. Consequently, analysis of whether people are saving enough for their retirement can contribute to avoiding future wealth inequalities among retirees. Spain is one of the countries with the greatest inequality in income distribution, so this issue is of even greater interest.


2004 ◽  
Vol 3 (1) ◽  
pp. 77-97 ◽  
Author(s):  
ALICIA H. MUNNELL ◽  
MAURICIO SOTO

The bear market that began in 2000 focused attention on two issues – pensions and profits. The initial pension problem was the big decline in value of individual 401(k) accounts. The profit issue was misconduct and stock options. In fact, there is another compelling issue involving both pensions and profits – the impact of the bear market on defined benefit pension plans.Plan sponsors have a projected benefit liability, which until recently was covered by the rise in asset values during the extended bull market. When stock values fell by 50 percent, sponsors for the first time in decades had to contribute to their pensions. But even without the decline in the stock market, sponsors of defined benefit plans were going to face increased pension contributions in the coming decade. The reason is a host of regulatory and legislative changes in the late 1980s that slowed or limited pension contributions.Our analysis suggests that in the absence of the stock market boom and the regulatory and legislative changes that reduced funding, the average firm's contribution to its pension plan would have been 50 percent higher during the 1982–2001 period; corporate profits would have been roughly 5 percent lower.The deferred contributions are coming due. The decline in the stock market and an ageing population imply that contributions would double from their current level. As the economy emerges from recession and the bear market draws to a close, firms and investors must be prepared to contend with a strong headwind from pension funding obligations that could slow the recover.


Author(s):  
Daniela Nicoleta Sahlian ◽  
Daniela Livia Trasca ◽  
Irina Denisa Munteanu ◽  
Liviu Matac ◽  
Daniela Codruta Pavel

AbstractQuite often, people ask questions about the size of their retirement funds, nevertheless, demographic changes are fueling an existing insecurity. Thereby, in the actual context, it is necessary to analyze the current retirement system in order to be able to provide reliable solutions in the future. The objective of the research is to elaborate an econometric analysis based on the information available for Pillar II of retirement pensions for each fund apart, but also at the market level. The mandatory private funds of Pillar II are managed by companies existing on the Romanian market. The study aims to analyze the causal relationship between the size of the fund, analyzed through the size of the total net assets, and its profitability. The research method consists in testing the connection between the two variables through a linear regression at the market and individual level, in terms of each fund. The results of the research will complete the already existing researches and, moreover, it will provide an updated base in order to evaluate the previsions regarding the investments made from these funds and act accordingly to increase the benefits that employees receive during their retirement age.


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