Premium
Corporate Pensions and the Maturity Structure of Debt
Author(s) -
Lin Yijia,
Liu Sheen,
Yu Jifeng
Publication year - 2019
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/jori.12215
Subject(s) - pension , debt , corporate debt , maturity (psychological) , monetary economics , debt service ratio , debt levels and flows , business , debt ratio , recourse debt , balance sheet , economics , internal debt , financial system , finance , psychology , developmental psychology
In this article, we investigate the role of pension obligations, the most significant off‐balance‐sheet item, in determining corporate debt maturity and spreads. We begin by showing a significant and robust positive relationship between pension liabilities and corporate short‐term debt ratio. We also find that more pension obligations cause a significant increase in the cost of debt, but this effect is mitigated by short‐maturity debt. Overall, our study shows that short‐term debt can reduce asymmetric information costs related to pensions.