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

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

doi:10.1016/j.jbankfin.2014.05.032

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

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

Authors

Professor Muhammed Ebrahim m.s.ebrahim@durham.ac.uk
Professor

I. Mathur

R.A. Gwilym

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

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Copyright Statement
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Banking & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking & Finance, 49, December 2014, 10.1016/j.jbankfin.2014.05.032.