How Does the Stock Market React to the Closure of a Pension Plan in the UK?

Abstract

We study market reactions to the announcement of a company closing their defined benefit pension plan in the UK to future accrual. For a sample of 48 plan closures, observed between 2006 and 2013, the empirical tests show a relatively muted market reaction on average. Although estimated returns are larger for firms for whom the pension plan poses higher-risk, we are unable to reject the hypothesis that returns are not statistically different from zero.