The Corporate Governance of Defined Benefit Pension Plans: Evidence from the United Kingdom

The Corporate Governance of Defined Benefit Pension Plans: Evidence from the United Kingdom

João F. Cocco, Paolo Volpin

Series number :

Serial Number: 
076/2005

Date posted :

March 01 2005

Last revised :

SSRN Share

Keywords

  • defined benefits • 
  • pension plans • 
  • insiders • 
  • Corporate governance • 
  • pension trustees

This paper studies the governance of defined-benefit pension plans in the United Kingdom. We construct a governance measure, equal to the proportion of trustees of the pension plan who are also executive directors of the sponsoring company.

Our findings indicate that pension plans of indebted companies with a higher proportion of insider-trustees: (i) invest a higher proportion of the pension plan assets into equities, (ii) contribute less into the pension plan, and (iii) have a larger dividend payout ratio. This evidence supports an agency view, whereby insider-trustees act in the interest of shareholders of the sponsoring company, and not necessarily pension plan members.

Authors

Real name: 
João F. Cocco