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Published in: Journal of Economics and Finance 3/2022

18-05-2022

Shareholder response to pension deficit: evidence from the COVID-19 pandemic

Authors: Amanjot Singh, Harminder Singh

Published in: Journal of Economics and Finance | Issue 3/2022

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Abstract

We examine the impact of firms’ pre-crisis pension underfunding on stock returns of US firms during the COVID-19 stock market crisis. Unlike the prior studies, our study uses the COVID-19 pandemic as an exogenous shock to pension underfunding and reports that shareholders remain indifferent to firms’ pension underfunding. The impact of pension underfunding remains trivial even after considering firms’ possible financial constraints, information asymmetry, and mandatory contributions associated with the underfunding. Our findings suggest that shareholders acknowledge pension deficit as a firm’s true liability only when pension underfunding contributions start affecting earnings and cash flows in the future.

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Appendix
Available only for authorised users
Footnotes
1
https://​www.​willistowerswats​on.​com/​en-US/​News/​2020/​04/​covid-19-takes-bite-out-of-us-corporate-pension-plans. Pension plan assets decreased from $1.52 (at the end of 2019) to $1.40 trillion as of March 31, 2020. On the other hand, pension plan liabilities increased from $1.75 (at the end of 2019) to $1.76 trillion as of March 31, 2020. According to the company, pension funded status (i.e., pension plan assets divided by pension plan liabilities) decreased from 87% at the end of 2019 to 79% as of March 31, 2020.
 
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Metadata
Title
Shareholder response to pension deficit: evidence from the COVID-19 pandemic
Authors
Amanjot Singh
Harminder Singh
Publication date
18-05-2022
Publisher
Springer US
Published in
Journal of Economics and Finance / Issue 3/2022
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-022-09581-z

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