Bridge over ocean
27 February 2018 Financial Analysts Journal

Does Freezing a Defined-Benefit Pension Plan Increase Company Value? Empirical Evidence

  1. Brendan McFarland
  2. Gaobo Pang
  3. Mark Warshawsky

This study empirically tests whether freezing or closing a defined-benefit (DB) pension plan increases the sponsoring company’s market value. The database used for this study consists of 82 publicly traded U.S. companies that announced freezes/closes in 2003–2007. On the basis of this extensive sample and through a set of parametric and nonparametric tests under the event study methodology, the study finds generally negative or insignificant abnormal returns in stock prices that can be associated with the freeze/close events. Little evidence supports the hypothesis that freezing or closing a DB plan increases company value.

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