Pension funding constraints and corporate expenditures

Weixi Liu, Ian Tonks

Research output: Contribution to journalArticlepeer-review

14 Citations (SciVal)


This paper examines the impact of a company's pension contributions (PCs) on its dividend and investment policies. The effects of shocks to cash flows on these corporate expenditures are identified by changes to pension funding regulations. Using a sample of DB pension schemes in FTSE350 UK-listed firms we find a strong negative relation between PCs and corporate dividends even after controlling for the correlation between funding status and unobserved investment opportunities. We find that the more stringent funding requirements under the Pensions Act 2004 had a more pronounced effect on both dividend and investment sensitivities to PCs.
Original languageEnglish
Pages (from-to)235-258
JournalOxford Bulletin of Economics and Statistics
Issue number2
Publication statusPublished - Apr 2013


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