Integrating corporate ownership and pension fund structures: A general equilibrium approach

Ebrahim, M.S.; Mathur, I.; Gwilym, R.A.

Abstract

This paper studies pension fund design in the context of investment in the debt and equity of a firm. We employ a general equilibrium framework to demonstrate that: (i) the asset location ‘puzzle’ is purely a partial equilibrium phenomenon, conceived in a risk neutral setting, that disappears with the introduction of sufficient risk aversion; (ii) the inability of policy makers to manage an economy with multiple firms yields a mixed equilibrium, where bonds are observed in both taxable and tax-deferred accounts; and (iii) the Pareto-efficient pension plan comprises of a defined benefit plan.

Citation

Ebrahim, M., Mathur, I., & Gwilym, R. (2014). Integrating corporate ownership and pension fund structures: A general equilibrium approach. Journal of Banking and Finance, 49, 553-569. https://doi.org/10.1016/j.jbankfin.2014.05.032

• Journal Article Type: Article
• Acceptance Date: May 12, 2014
• Online Publication Date: Aug 5, 2014
• Publication Date: Dec 1, 2014
• Deposit Date: Apr 15, 2015
• Publicly Available Date: Apr 20, 2015
• Journal: Journal of Banking and Finance
• Print ISSN: 0378-4266
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 49
• Pages: 553-569
• DOI: https://doi.org/10.1016/j.jbankfin.2014.05.032
• Keywords: Capital structure, Defined benefit, Defined contribution, Marshallian Cross, Portfolio choice, Tax arbitrage.
• Public URL: https://durham-repository.worktribe.com/output/1410079