Corporate expenditures and pension contributions: evidence from UK company accounts

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 26 September 2005

Working Paper No. 276
By Philip Bunn and Kamakshya Trivedi

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.

PDFCorporate expenditures and pension contributions: evidence from UK company accounts

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