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Corporate expenditures and pension contributions: evidence from UK company accounts

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  • Philip Bunn
  • Kamakshya Trivedi

Abstract

This paper examines how corporate behaviour is related to financial pressure, where the financial pressure is on account of pension contributions to the company pension scheme. Using a large panel of quoted non-financial UK firms from 1983-2002, we estimate generalised methods of moments models for dividends and investment. Our results suggest that dividends are reduced in response to higher pension contributions. There is only weak evidence of any impact on investment. Companies that seek to tackle underfunding of defined benefit pension schemes by raising their contributions could pay lower dividends than they would have otherwise.

Suggested Citation

  • Philip Bunn & Kamakshya Trivedi, 2005. "Corporate expenditures and pension contributions: evidence from UK company accounts," Bank of England working papers 276, Bank of England.
    • Handle: RePEc:boe:boeewp:276
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    File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2005/WP276.pdf
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    References listed on IDEAS

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    Cited by:

    1. Bunn, Philip & Smietanka, Pawel & Mizen, Paul, 2018. "Growing pension deficits and the expenditure decisions of UK companies," Bank of England working papers 714, Bank of England.
    2. Goto, Shingo & Yanase, Noriyoshi, 2021. "Pension return assumptions and shareholder-employee risk-shifting," Journal of Corporate Finance, Elsevier, vol. 70(C).
    3. Josiah, J. & Gough, O. & Haslam, J. & Shah, N., 2014. "Corporate reporting implication in migrating from defined benefit to defined contribution pension schemes: A focus on the UK," Accounting forum, Elsevier, vol. 38(1), pages 18-37.
    4. Armitage, Seth & Gallagher, Ronan, 2019. "Are pension contributions a threat to shareholder payouts?," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 27-42.
    5. Parker, Miles, 2006. "Diverging Trends in Aggregate and Firm–Level Volatility in the UK," Discussion Papers 16, Monetary Policy Committee Unit, Bank of England.

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