City Research Online

Abstract

We examine how funding deficit pressures shape the risk-taking of U.S. corporate definedbenefit (DB) pension plans and how targeted regulatory relief can mitigate these incentives. Using the 2012 MAP-21 reform, which temporarily eased funding pressure by revising discount rate calculations, we show that plans receiving greater relief significantly reduced their equity allocations and shifted toward safer assets. This de-risking was most pronounced among active plans and those sponsored by more financially constrained firms. Our findings demonstrate that targeted regulatory relief can curb risk-taking incentives, even without altering underlying economic conditions or financial reporting standards, and shed light on the likely (and unlikely) frictions driving such behavior.

Publication Type:	Article
Publisher Keywords:	Private pension; defined benefits, asset allocation, risk taking, risk shifting
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management H Social Sciences > HF Commerce H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Faculty of Finance
SWORD Depositor:	Symplectic Administrator

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