Institutional Investor Ownership and Corporate Pension Transparency


  • Tim V. Eaton,

  • John R. Nofsinger,

  • Abhishek Varma

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    • Tim V. Eaton is the EY Teaching Scholar and Associate Professor in the Department of Accountancy at the Richard T. Farmer School of Business at Miami University in Oxford, OH. John R. Nofsinger is the William H. Seward Endowed Chair in Finance and Professor in the Business Administration Department at the College of Business and Public Policy at the University of Alaska in Anchorage, AK. Abhishek Varma is the Dixie L. Mills Scholar in Finance and Assistant Professor in the Department of Finance, Insurance, and Law at the College of Business at Illinois State University in Normal, IL.

  • Dr. Eaton gratefully acknowledges funding from the Farmer School of Business.


We examine the association between institutional ownership and defined benefit (DB) pension decisions. We find that institutional ownership is negatively associated with pension underfunding, opportunistic increases in the expected rate of return assumption in the presence of underfunding, and significant ownership of the firm's own stock in the DB plan portfolio. Furthermore, these relations are stronger when institutional ownership is concentrated, when institutions are nontransient investors, or when institutions are relatively large. These results suggest that institutional investors are monitoring firm pension decisions, particularly those institutions with stronger monitoring incentives or resources.