HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURES
We examine the stock return implications of corporate-defined benefit pension plans in innovative U.S. firms and in R&D- and patent-sorted portfolio specifications. We find that investors underreact to firms increasing off-balance-sheet liabilities. Pensions represent material off-balance-sheet...
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| Format: | Article |
| Language: | English |
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World Scientific Publishing
2023-06-01
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| Series: | Journal of Financial Management, Markets and Institutions |
| Subjects: | |
| Online Access: | https://www.worldscientific.com/doi/10.1142/S2282717X23500020 |
| _version_ | 1797742415798337536 |
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| author | M. KABIR HASSAN M. SYDUL KARIM ALBERTO DREASSI ANDREA PALTRINIERI |
| author_facet | M. KABIR HASSAN M. SYDUL KARIM ALBERTO DREASSI ANDREA PALTRINIERI |
| author_sort | M. KABIR HASSAN |
| collection | DOAJ |
| description | We examine the stock return implications of corporate-defined benefit pension plans in innovative U.S. firms and in R&D- and patent-sorted portfolio specifications. We find that investors underreact to firms increasing off-balance-sheet liabilities. Pensions represent material off-balance-sheet liabilities: in our extensive and large sample (1985–2017, 2541 firms for 26,522 observations), entities with pension plans are 38% more levered when we integrate pension liabilities and assets into the firms’ capital structure. We find that R&D-intensive firms increasing the size of their pension liability subsequently underperform their benchmark returns. Through six alternative R&D-market capitalization portfolios, we also find that this association is stronger for smaller firms. Finally, the relationship remains persistent over a long horizon. These findings are robust to endogeneity concerns addressed through instrumental variables, propensity score matching, and Heckman correction. |
| first_indexed | 2024-03-12T14:40:33Z |
| format | Article |
| id | doaj.art-db9000c6bf1b468aae909f6ce763f926 |
| institution | Directory Open Access Journal |
| issn | 2282-717X |
| language | English |
| last_indexed | 2024-03-12T14:40:33Z |
| publishDate | 2023-06-01 |
| publisher | World Scientific Publishing |
| record_format | Article |
| series | Journal of Financial Management, Markets and Institutions |
| spelling | doaj.art-db9000c6bf1b468aae909f6ce763f9262023-08-16T10:47:44ZengWorld Scientific PublishingJournal of Financial Management, Markets and Institutions2282-717X2023-06-01110110.1142/S2282717X23500020HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURESM. KABIR HASSAN0M. SYDUL KARIM1ALBERTO DREASSI2ANDREA PALTRINIERI3Department of Economics and Finance, University of New Orleans, USAKalamazoo College, Kalamazoo, USAUniversity of Trieste, ItalyUniversità Cattolica del Sacro Cuore, ItalyWe examine the stock return implications of corporate-defined benefit pension plans in innovative U.S. firms and in R&D- and patent-sorted portfolio specifications. We find that investors underreact to firms increasing off-balance-sheet liabilities. Pensions represent material off-balance-sheet liabilities: in our extensive and large sample (1985–2017, 2541 firms for 26,522 observations), entities with pension plans are 38% more levered when we integrate pension liabilities and assets into the firms’ capital structure. We find that R&D-intensive firms increasing the size of their pension liability subsequently underperform their benchmark returns. Through six alternative R&D-market capitalization portfolios, we also find that this association is stronger for smaller firms. Finally, the relationship remains persistent over a long horizon. These findings are robust to endogeneity concerns addressed through instrumental variables, propensity score matching, and Heckman correction.https://www.worldscientific.com/doi/10.1142/S2282717X23500020Stock returnsR&D expendituresD.B. pension schemesleverageoff-balance sheet items |
| spellingShingle | M. KABIR HASSAN M. SYDUL KARIM ALBERTO DREASSI ANDREA PALTRINIERI HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURES Journal of Financial Management, Markets and Institutions Stock returns R&D expenditures D.B. pension schemes leverage off-balance sheet items |
| title | HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURES |
| title_full | HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURES |
| title_fullStr | HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURES |
| title_full_unstemmed | HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURES |
| title_short | HOW CORPORATE PENSIONS AFFECT STOCK RETURNS: THE ROLE OF R&D EXPENDITURES |
| title_sort | how corporate pensions affect stock returns the role of r d expenditures |
| topic | Stock returns R&D expenditures D.B. pension schemes leverage off-balance sheet items |
| url | https://www.worldscientific.com/doi/10.1142/S2282717X23500020 |
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