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Institutional Investor Ownership and Corporate Pension Transparency
Author(s) -
Eaton Tim V.,
Nofsinger John R.,
Varma Abhishek
Publication year - 2014
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12045
Subject(s) - pension , institutional investor , incentive , transparency (behavior) , business , stock (firearms) , portfolio , pension plan , rate of return , finance , monetary economics , accounting , economics , corporate governance , market economy , mechanical engineering , political science , law , engineering
We examine the association between institutional ownership and defined benefit (DB) pension decisions. We find that institutional ownership is negatively associated with pension underfunding, opportunistic increases in the expected rate of return assumption in the presence of underfunding, and significant ownership of the firm's own stock in the DB plan portfolio. Furthermore, these relations are stronger when institutional ownership is concentrated, when institutions are nontransient investors, or when institutions are relatively large. These results suggest that institutional investors are monitoring firm pension decisions, particularly those institutions with stronger monitoring incentives or resources.