Pension Funding Constraints and Corporate Expenditures

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Pension Funding Constraints and Corporate Expenditures

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dc.contributor.author Liu, Weixi en_GB
dc.contributor.author Tonks, Ian en_GB
dc.date.accessioned 2010-04-13T15:39:36Z en_GB
dc.date.accessioned 2011-01-25T10:28:25Z en_US
dc.date.accessioned 2013-03-20T11:10:37Z
dc.date.issued 2010-01 en_GB
dc.description.abstract This paper examines the effect of a company’s pension contributions on its dividend and investment policies. Using a sample of all FTSE350 UK listed firms with at least one defined benefit pension scheme from 2001 to 2004, we find a strong and negative relation between pension contributions and corporate dividend payments even after controlling for the correlation between funding status and unobserved investment opportunities. We find a weaker result using investment equations, where investment is negatively related to pension contributions but the relation is not statistically significant. Our results suggest a preference of financial rather than real channels for firms making balance sheet adjustments. We also examine whether the new funding requirements under the Pensions Act 2004 have had any effects on firms’ pension contributions and accordingly their corporate expenditure decisions. We include additional data from 2005-2006, and find that both dividend and investment sensitivity to pension contributions is more pronounced after the introduction of the new funding requirements. en_GB
dc.identifier.uri http://hdl.handle.net/10036/96453 en_GB
dc.language.iso en en_GB
dc.publisher University of Exeter Business School en_GB
dc.relation.ispartofseries Xfi Centre for Finance and Investment working papers en_GB
dc.relation.ispartofseries 10/02 en_GB
dc.relation.url http://xfi.exeter.ac.uk/workingpapers/1002.pdf en_GB
dc.subject pension contributions en_GB
dc.subject financial constraints en_GB
dc.subject dividend sensitivity en_GB
dc.subject investment sensitivity en_GB
dc.subject Pensions Act 2004 en_GB
dc.title Pension Funding Constraints and Corporate Expenditures en_GB
dc.type Working Paper en_GB
dc.date.available 2010-04-13T15:39:36Z en_GB
dc.date.available 2011-01-25T10:28:25Z en_US
dc.date.available 2013-03-20T11:10:37Z
dc.identifier.issn 1743-548X en_GB
dc.description Working paper en_GB


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