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来源类型 | Working Paper |
规范类型 | 报告 |
DOI | 10.3386/w10650 |
来源ID | Working Paper 10650 |
Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan? | |
Li Jin; Robert Merton; Zvi Bobie | |
发表日期 | 2004-07-26 |
出版年 | 2004 |
语种 | 英语 |
摘要 | This paper examines the empirical question of whether systematic equity risk of U.S. firms as measured by beta from the Capital Asset Pricing Model reflects the risk of their pension plans. There are a number of reasons to suspect that it might not. Chief among them is the opaque set of accounting rules used to report pension assets, liabilities, and expenses. Pension plan assets and liabilities are off-balance sheet, and are often viewed as segregated from the rest of the firm, with its own trustees. Pension accounting rules are complicated. Furthermore, the role of Pension Benefit Guaranty Corporation further clouds the real relation between pension plan risk and firm equity risk. The empirical findings in this paper are consistent with the hypothesis that equity risk does reflect the risk of the firm's pension plan despite arcane accounting rules for pensions. This finding is consistent with informational efficiency of the capital markets. It also has implications for corporate finance practice in the determination of the cost of capital for capital budgeting. Standard procedure uses de-leveraged equity return betas to infer the cost of capital for operating assets. But the de-leveraged betas are not adjusted for the risk of the pension assets and liabilities. Failure to make this adjustment will typically bias upwards estimates of the discount rate for capital budgeting. The magnitude of the bias is shown here to be large for a number of well-known U.S. companies. This bias can result in positive net-present-value projects being rejected. |
主题 | Financial Economics ; Financial Markets ; Financial Institutions |
URL | https://www.nber.org/papers/w10650 |
来源智库 | National Bureau of Economic Research (United States) |
引用统计 | |
资源类型 | 智库出版物 |
条目标识符 | http://119.78.100.153/handle/2XGU8XDN/568279 |
推荐引用方式 GB/T 7714 | Li Jin,Robert Merton,Zvi Bobie. Do a Firm's Equity Returns Reflect the Risk of Its Pension Plan?. 2004. |
条目包含的文件 | ||||||
文件名称/大小 | 资源类型 | 版本类型 | 开放类型 | 使用许可 | ||
w10650.pdf(292KB) | 智库出版物 | 限制开放 | CC BY-NC-SA | 浏览 |
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