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Corporate pension plans and investment choices: Bargaining or conforming?
Duygun, Meryem; Huang, Bihong; Qian, Xiaolin; Tam, Lewis H. K.
2018-06
Source PublicationJOURNAL OF CORPORATE FINANCE
ISSN0929-1199
Volume50Pages:519-537
AbstractThis paper investigates the impacts of defined-benefit (DB) pension plans on the corporate investment choices between diversifying and non-diversifying investments. We find a firm's DB plan coverage is negatively associated with its propensity of making a major investment. Subject to a major investment decision, however, the firms with higher DB plan coverage is more likely to diversify, i.e. acquire firms abroad or in other industries, rather than invest in fixed assets or make non-diversifying (i.e. domestic horizontal) acquisitions. Moreover, in diversifying acquisitions, they are more likely to invest in countries or industries with strongly unionized workforce. Further analysis on post-investment performance shows that firms with higher DB plan coverage experience a greater improvement in operating profitability after a diversifying acquisition, and the improvement mainly comes from a higher asset turnover rather than cost reduction. On the other hand, DB plan sponsoring firms experience a decline in profitability after a large capital expenditure or a non-diversifying acquisition. We propose both bargaining motive and conforming motive can explain these results. (C) 2017 Elsevier B.V. All rights reserved.
KeywordDefined-benefit pension DB plan coverage Bargaining power Conforming motive Diversifying acquisitions
DOI10.1016/j.jcorpfin.2017.10.005
URLView the original
Indexed BySSCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectBusiness, Finance
WOS IDWOS:000436917500025
PublisherELSEVIER SCIENCE BV
The Source to ArticleWOS
Fulltext Access
Citation statistics
Document TypeJournal article
CollectionUniversity of Macau
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GB/T 7714
Duygun, Meryem,Huang, Bihong,Qian, Xiaolin,et al. Corporate pension plans and investment choices: Bargaining or conforming?[J]. JOURNAL OF CORPORATE FINANCE,2018,50:519-537.
APA Duygun, Meryem,Huang, Bihong,Qian, Xiaolin,&Tam, Lewis H. K..(2018).Corporate pension plans and investment choices: Bargaining or conforming?.JOURNAL OF CORPORATE FINANCE,50,519-537.
MLA Duygun, Meryem,et al."Corporate pension plans and investment choices: Bargaining or conforming?".JOURNAL OF CORPORATE FINANCE 50(2018):519-537.
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