TY  - JOUR
AU  - Rauh,Joshua
TI  - Risk Shifting versus Risk Management: Investment Policy in Corporate Pension Plans
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13240
PY  - 2007
Y2  - July 2007
UR  - http://www.nber.org/papers/w13240
L1  - http://www.nber.org/papers/w13240.pdf
N1  - Author contact info:
Joshua Rauh
Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-4462
Fax: 847/491-5719
E-Mail: joshua-rauh@kellogg.northwestern.edu
AB  - The asset allocation of defined benefit pension plans is a setting where both risk shifting and risk management incentives are likely be present.  Empirically, firms with poorly funded pension plans and weak credit ratings allocate a greater share of pension fund assets to safer securities such as government debt and cash, whereas firms with well-funded pension plans and strong credit ratings invest more heavily in equity.  These relations hold both in the cross-section and within firms and plans over time.  The incentive to limit costly financial distress plays a considerably larger role than risk shifting in explaining variation in pension fund investment policy among U.S. firms.
ER  -