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Journal of Financial and Quantitative Analysis Vol. 48 No. 4 2013

Corporate Pension Plans as Takeover Deterrents

João F. Cocco1,2,3; Paolo F. Volpin1,2,3

1 City, University of London · 2 Luxembourg School of Business · 3 London Business School

open access

Abstract

We use UK data to show that firms that sponsor a defined-benefit pension plan are less likely to be targeted in an acquisition and, conditional on an attempted takeover, they are less likely to be acquired. Our explanation is that the uncertainty in the value of pension liabilities is a source of risk for acquirers of the firm's shares, which works as a takeover deterrent. In support of this explanation we find that these same firms are more likely to use cash when acquiring other firms, and that the announcement of a cash acquisition is associated with positive announcement effects.

DOI
10.1017/s0022109013000355
Volume
48
Issue
4
Pages
1119-1144
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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