Finance Seminar（2015-33）

Topic:Pay Me Now (And Later): Bonus Boosts Before Pension Freezes And Executive Departures

Speaker:Jun Yang, Indiana University

Time:Friday, 30 October, 10:00-11:30

Location:Room K01, Guanghua Hotel

Abstract:We show that large public companies in the United States change the assumptions of the benefit formulas of the defined benefits pension plans for their top executives in anticipation of plan freezes and executive retirements. In particular, on average top executives receive a boost in annual bonuses (an input of the pension benefit formula) by 15–50% one year before pension freezes and executive departures. Such boosts are not driven by firm performance or other known determinants of annual bonuses. Our findings are also robust to alternative research designs that address potential endogeneity problems. Interestingly, we do not find significant increases in equity awards, which do not affect the value of pension benefits, before pension freezes or executive departures.