Pension funding constraints and corporate expenditures


Liu, W. and Tonks, I., 2013. Pension funding constraints and corporate expenditures. Oxford Bulletin of Economics and Statistics, 75 (2), pp. 235-258.

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This paper examines the impact of a company's pension contributions (PCs) on its dividend and investment policies. The effects of shocks to cash flows on these corporate expenditures are identified by changes to pension funding regulations. Using a sample of DB pension schemes in FTSE350 UK-listed firms we find a strong negative relation between PCs and corporate dividends even after controlling for the correlation between funding status and unobserved investment opportunities. We find that the more stringent funding requirements under the Pensions Act 2004 had a more pronounced effect on both dividend and investment sensitivities to PCs.


Item Type Articles
CreatorsLiu, W.and Tonks, I.
DepartmentsSchool of Management
ID Code30487


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