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Article: Employees' risk attitude and corporate risk taking: Evidence from pension asset allocations

TitleEmployees' risk attitude and corporate risk taking: Evidence from pension asset allocations
Authors
KeywordsPension asset allocation
Bankruptcy
Labor
Risk aversion
Risk taking
Issue Date2018
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfin
Citation
Journal of Corporate Finance, 2018, v. 48, p. 261-274 How to Cite?
AbstractDo labor characteristics matter to corporate decisions? We answer this question by examining whether firms consider the risk attitude of rank-and-file employees in investing the pension assets of defined benefit plans. We construct a direct measure of employees' risk attitude from their defined contribution pension portfolio allocations. We find that firms with more risk-averse employees exhibit higher sensitivity to their own default risk in their defined benefit pension investment. The reduction in pension risk taking induced by sponsor risk is more pronounced for low R&D firms, and in the period with stringent pension regulation. We further show that sponsors consider employees' risk aversion in making pension investment decisions regardless of the power of labor union. Overall, our findings suggest that firms incorporate employees' risk attitude into corporate policies.
Persistent Identifierhttp://hdl.handle.net/10722/279026
ISSN
2017 Impact Factor: 2.215
2015 SCImago Journal Rankings: 1.446

 

DC FieldValueLanguage
dc.contributor.authorGuan, Y-
dc.contributor.authorTang, DY-
dc.date.accessioned2019-10-21T02:18:15Z-
dc.date.available2019-10-21T02:18:15Z-
dc.date.issued2018-
dc.identifier.citationJournal of Corporate Finance, 2018, v. 48, p. 261-274-
dc.identifier.issn0929-1199-
dc.identifier.urihttp://hdl.handle.net/10722/279026-
dc.description.abstractDo labor characteristics matter to corporate decisions? We answer this question by examining whether firms consider the risk attitude of rank-and-file employees in investing the pension assets of defined benefit plans. We construct a direct measure of employees' risk attitude from their defined contribution pension portfolio allocations. We find that firms with more risk-averse employees exhibit higher sensitivity to their own default risk in their defined benefit pension investment. The reduction in pension risk taking induced by sponsor risk is more pronounced for low R&D firms, and in the period with stringent pension regulation. We further show that sponsors consider employees' risk aversion in making pension investment decisions regardless of the power of labor union. Overall, our findings suggest that firms incorporate employees' risk attitude into corporate policies.-
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jcorpfin-
dc.relation.ispartofJournal of Corporate Finance-
dc.subjectPension asset allocation-
dc.subjectBankruptcy-
dc.subjectLabor-
dc.subjectRisk aversion-
dc.subjectRisk taking-
dc.titleEmployees' risk attitude and corporate risk taking: Evidence from pension asset allocations-
dc.typeArticle-
dc.identifier.emailTang, DY: yjtang@hku.hk-
dc.identifier.authorityTang, DY=rp01096-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jcorpfin.2017.11.001-
dc.identifier.scopuseid_2-s2.0-85034647921-
dc.identifier.hkuros308112-
dc.identifier.volume48-
dc.identifier.spage261-
dc.identifier.epage274-
dc.publisher.placeNetherlands-

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