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Corporate pension plans as takeover deterrents

Cocco, J. F. & Volpin, P. (2013). Corporate pension plans as takeover deterrents. Journal of Financial and Quantitative Analysis, 48(4), pp. 1119-1144. doi: 10.1017/S0022109013000355


We use UK data to show that firms that sponsor a defined-benefit pension plan are less likely to be targeted in an acquisition and, conditional on an attempted takeover, they are less likely to be acquired. Our explanation is that the uncertainty in the value of pension liabilities is a source of risk for acquirers of the firm's shares, which works as a takeover deterrent. In support of this explanation we find that these same firms are more likely to use cash when acquiring other firms, and that the announcement of a cash acquisition is associated with positive announcement effects.

Publication Type: Article
Additional Information: Copyright Cambridge University Press 2013. This version may have been revised following peer review but may be subject to further editorial input by Cambridge University Press.
Publisher Keywords: M&A activity, takeover defenses, corporate pensions
Subjects: H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
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