Funding status of defined benefit pension plans and idiosyncratic return volatility

Yangyang Chen

    Research output: Contribution to journalArticleResearchpeer-review

    Abstract

    In this article, I explore how the funding status of a sponsoring firm s defined benefit pension plans affects its idiosyncratic volatility. Using a large sample of U.S. firms from 1980 to 2010, I document a positive and significant relation between pension deficits and idiosyncratic volatility. The relation is stronger for firms that are financially constrained and that have a worse information environment. The findings are consistent with the argument that large pension deficits generate greater risk for the firm s future operations and financing, and deteriorate its financial disclosure quality, which raises firm idiosyncratic volatility.
    Original languageEnglish
    Pages (from-to)35 - 57
    Number of pages23
    JournalJournal of Financial Research
    Volume38
    Issue number1
    DOIs
    Publication statusPublished - 2015

    Cite this

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    title = "Funding status of defined benefit pension plans and idiosyncratic return volatility",
    abstract = "In this article, I explore how the funding status of a sponsoring firm s defined benefit pension plans affects its idiosyncratic volatility. Using a large sample of U.S. firms from 1980 to 2010, I document a positive and significant relation between pension deficits and idiosyncratic volatility. The relation is stronger for firms that are financially constrained and that have a worse information environment. The findings are consistent with the argument that large pension deficits generate greater risk for the firm s future operations and financing, and deteriorate its financial disclosure quality, which raises firm idiosyncratic volatility.",
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    year = "2015",
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    Funding status of defined benefit pension plans and idiosyncratic return volatility. / Chen, Yangyang.

    In: Journal of Financial Research, Vol. 38, No. 1, 2015, p. 35 - 57.

    Research output: Contribution to journalArticleResearchpeer-review

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    AB - In this article, I explore how the funding status of a sponsoring firm s defined benefit pension plans affects its idiosyncratic volatility. Using a large sample of U.S. firms from 1980 to 2010, I document a positive and significant relation between pension deficits and idiosyncratic volatility. The relation is stronger for firms that are financially constrained and that have a worse information environment. The findings are consistent with the argument that large pension deficits generate greater risk for the firm s future operations and financing, and deteriorate its financial disclosure quality, which raises firm idiosyncratic volatility.

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