What Drives Corporate Pension Plan Contributions: Moral Hazard or Tax Benefits?

In testing moral hazard and tax benefit hypotheses regarding defined benefit plan funding and contribution incentives by incorporating sponsors’ bankruptcy risk, the authors proposed that high-bankruptcy-risk sponsors have a strong moral hazard incentive because the put value of the U.S. Pension Benefit Guaranty Corporation guarantee is high. For low-bankruptcy-risk sponsors, the put value is low; maximizing tax benefits associated with pension contributions becomes a powerful incentive. Results based on sponsors’ voluntary contributions support both hypotheses

The impact of government regulation and ownership on the performance of securities companies: Evidences from China

We study the impacts of government regulation and ownership on the performance of Chinese securities firms. Consistent with the grapping hand hypothesis, we find a negative relationship between direct government ownership and performance. In addition, we find that business entry qualifications enhance the performance of security firms, since regulatory control of business entry keeps potential competition away. Our study provides important policy implications. As China slowly adapts to a more liberal financial system, it needs to consider the delicate balance between government regulations and free market conducts. Furthermore, it needs to address the increasing concern of the impairment on performance due to government ownership. © 2005 Elsevier Inc. All rights reserved