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- Title
Defined benefit company pensions and corporate valuations: simulation and empirical evidence from the United Kingdom.
- Authors
Trivedi, Kamakshya; Young, Garry
- Abstract
The paper investigates a feature of Great Britain's defined benefit company pensions and its possible effect on how company stock prices respond to common shocks. It considers two channels through which common shocks to companies' real business values can be amplified. A stylized model of a company's balance sheet was used to demonstrate how common shocks can be amplified because of economic leverage and equity cross-holdings. The total impact of the 5% shock was broken down into the part that comes from additional leverage and the part that comes from cross-holdings.
- Subjects
UNITED Kingdom; DEFINED benefit pension plans; STOCK prices; PENSIONS; VALUATION
- Publication
Bank of England Quarterly Bulletin, 2006, Vol 46, Issue 2, p170
- ISSN
0005-5166
- Publication type
Article