Risk shifting versus risk management
Subtitle: investment policy in corporate pension plans
By: Joshua Rauh.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 13240.; Working paper series (National Bureau of Economic Research) -- working paper no. 13240.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 60
Subjects: Defined benefit pension plans -- United States; Risk management -- Government policy -- United States; Investment analysis
Description: The asset allocation of defined benefit pension plans is a setting where both risk shifting and risk management incentives are likely be present. Empirically, firms with poorly funded pension plans and weak credit ratings allocate a greater share of pension fund assets to safer securities such as government debt and cash, whereas firms with well-funded pension plans and strong credit ratings invest more heavily in equity. These relations hold both in the cross-section and within firms and plans over time. The incentive to limit costly financial distress plays a considerably larger role than risk shifting in explaining variation in pension fund investment policy among U.S. firms.
Notes: "July 2007"

Includes bibliographical references (p. 36-39).

Also available in PDF from the NBER world wide web site (www.nber.org).