Finance Seminar with Vasso Ioannidou, Bayes Business School

The Department of Finance and PeRCent Pension Research Center are proud to announce the upcoming seminar with Vasso Ioannidou, Bayes Business School. 

Vasso Ioannidou will present:

Corporate Pension Risk-Taking in a Low-Interest Rate Environment

ABSTRACT:
We study the effect of interest rates on the risk-taking of defined-benefit (DB) private pension plans in the United States. We find that in the low-interest-rate environment following the financial crisis, minimum funding requirements for many DB plans became binding, increasing incentives to invest in riskier assets. Using a difference-in-differences analysis based on a regulatory shock to the discount rates of pension liabilities, our findings indicate that exogenous increases in interest rates relax funding pressure, discouraging underfunded plans’ investments in riskier assets. Reducing funding pressure also decreases the probability of pension freezes—a process that shifts risk from firms to employees—but it also decreases voluntary contributions to underfunded plans.

Location:
Solbjerg Plads 3
2000 Frederiksberg
Room: SPs07