Catalogue Search | MBRL
Are you sure you want to remove the book from the shelf?
{{itemTitle}}
437,740
result(s) for
"Pension plans"
Sort by:
Using 10-K Text to Gauge Financial Constraints
Measuring the extent to which a firm is financially constrained is critical in assessing capital structure. Extant measures of financial constraints focus on macro firm characteristics such as age and size, variables highly correlated with other firm attributes. We parse 10-K disclosures filed with the U.S. Securities and Exchange Commission (SEC) using a unique lexicon based on constraining words. We find that the frequency of constraining words exhibits very low correlation with traditional measures of financial constraints and predicts subsequent liquidity events, such as dividend omissions or increases, equity recycling, and underfunded pensions, better than widely used financial constraint indexes.
Journal Article
The Liabilities and Risks of State-Sponsored Pension Plans
As of December 2008, state governments had approximately$1.94 trillion set aside in pension funds for their employees. How does the value of these assets compare to the present value of states' pension liabilities? Just as future Social Security and Medicare liabilities do not appear in the headline numbers of the U.S. federal debt, the financial liability from underfunded public pensions does not appear in the headline numbers of state debt. If pensions are underfunded, then the gap between pension assets and liabilities is off-balance-sheet government debt. We show that government accounting standards require states to use procedures that severely understate their liabilities. We then discuss the true economic funding of state public pension plans. Using market-based discount rates that reflect the risk profile of the pension liabilities, we calculate that the present value of the already-promised pension liabilities of the 50 U.S. states amount to $ 5.17 trillion, assuming that states cannot default on pension benefits that workers have already earned. Net of the$1.94 trillion in assets, these pensions are underfunded by $ 3.23 trillion. This “pension debt” dwarfs the states' publicly traded debt of $0.94 trillion. And we show that even before the market collapse of 2008, the system was economically severely underfunded, though public actuarial reports presented the plans' funding status in a more favorable light.
Journal Article
Where Do Shareholder Gains in Hedge Fund Activism Come From? Evidence From Employee Pension Plans
We find that defined benefit employee pension plans of firms that are targets of hedge fund activism experience underfunding and their defined contribution plans experience reductions in employer contributions. Pension underfunding occurs due to reduced employer contributions to the plans, which target firms justify by increasing the assumed rates of returns on plan investments and the discount rate used to compute the present value of plan obligations. Despite tilting plan investments toward riskier assets, pension fund performance does not improve after activists target a firm. Our evidence suggests that shareholder wealth gains from activism are partly wealth transfers from employees.
Journal Article
Old-age income support in the 21st century : an international perspective on pension systems and reform
The past decade has brought an increasing recognition to the importance of pension systems to the economic stability of nations and the security of their aging populations. During this time, the World Bank has taken a leading role in addressing this challenge through its support for pension reforms around the world. Old-Age Income Support in the 21st Century attempts to explain current policy thinking and update the World Bank’s perspective on pension reform. The Bank has been involved in pension reforms in nearly 60 countries, and the demand for its support continues to grow. This book incorporates lessons learned from recent Bank experiences and research that have significantly increased knowledge and insight regarding how best to proceed in the future. The book has a comprehensive introduction and two main parts. Part I presents the conceptual underpinnings for the Bank’s thinking on pension systems and reforms, including structure of Bank lending in this area. Part II highlights key design and implementation issues where it signals areas of confidence and areas for further research and experience, and includes a section on regional reform experiences, including Latin American and Europe and Central Asia. This book will be of interest to Bank clients, the international community, and anyone interested in pension systems and reform.
eBook
Are Companies Offloading Risk onto Employees in Times of Uncertainty? Insights from Corporate Pension Plans
We investigate how firms adjust corporate pension plans in response to economic policy uncertainty (EPU). Using a sample of US-listed firms, we find that firms increase pension underfunding levels when facing higher EPU. The result is robust to controlling for pension portfolio returns, discount rates, plan sizes, pension liability, numbers of employees, other macroeconomic factors, difference-in-differences and instrumental variable estimation, and additional evidence of pension risk-shifting. Further analysis reveals that financial distress and information asymmetry induced through EPU are the potential channels. The effect is stronger for firms having CEOs being excessively paid, using cash flow as a performance metric in CEO compensation, paying high dividends, and having short-term institutional investors, whereas the presence of unions, positive corporate culture, and social capital alleviate the effect. Notably, managers, not shareholders, appear to be the party reaping the benefits. Our findings suggest that firms may shift risk to employees in response to heightened uncertainty and institutional characteristics play a moderating role in this crucial business ethics issue.
Journal Article
Discounting State and Local Pension Liabilities
Nearly all state and local pension defined benefit pensions plans compute the present value of their future liabilities using the expected return on the assets held in the pension trust. This practice contrasts sharply with finance theory, which is unambiguous that the appropriate discount rate is one that reflects the riskiness of the liabilities, not the assets. This paper notes that the strong constitutional and other legal benefit protections make many defined benefit pension obligations virtually risk free. Were governments to discount liabilities in this way, it would reveal that state and local pensions are more underfunded than is generally reported.
Journal Article
Behavioral Economics and the Retirement Savings Crisis
Behavioral economics can be scaled up to have a major, positive impact on certain behaviors, such as retirement savings. Many countries are facing a retirement savings crisis. In the United States, for example, the fraction of workers at risk of having inadequate funds to maintain their lifestyle through retirement is estimated to have increased from 31% to 53% from 1983 to 2010 ( 1 ). Roughly half of U.S. employees (78 million) have no access to retirement plans at their workplace ( 2 ). Fortunately, there are solutions to these problems. We simply have to change the choice architecture of retirement plans by utilizing the findings of behavioral economics research ( 3 ) and make such plans available to all workers. We describe a large-scale field demonstration of the potential impact of such research-based changes in how we save.
Journal Article
How Financial Literacy Affects Household Wealth Accumulation
This study isolates the causal effects of financial literacy and schooling on wealth accumulation using a new household dataset and an instrumental variables (IV) approach. Financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, whereas the IV estimates reveal even more potent effects of financial literacy. They also indicate that the schooling effect only becomes positive when interacted with financial literacy. Estimated impacts are substantial enough to imply that investments in financial literacy could have large wealth payoffs.
Journal Article
The Economics of Pensions
This paper sets out the economic analytics of pensions. After introductory discussion, successive sections consider the effects of different pension arrangements on labour markets, on national savings and growth, and on the distribution of burdens and benefits. These areas are controversial and politically highly salient. While we are open about expressing our own views, the main purpose of the paper is to set out the analytical process by which we reach them, to enable readers to form their own conclusions.
Journal Article