Large U.S. companies modify the inputs of benefit formulas of top executives’ defined benefit pension plans before plan-related events. We find an average boost of 17–33% in annual bonuses (a determinant of benefits) but no increases in equity awards (not a determinant of benefits) one year before pension freezes. Our results are stronger under propensity score matching. Moreover, firms lower plan discount rates by 13–35 basis points when top executives are ready to retire with a lump-sum benefit distribution. Interestingly, we find no pension-related bonus boosts or discount rate manipulation at firms with strong corporate governance.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.

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