Employees' risk attitude and corporate risk taking: Evidence from pension asset allocations

Yanling GUAN, Dragon Yongjun Tang*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)


Do labor characteristics matter to corporate decisions? We answer this question by examining whether firms consider the risk attitude of rank-and-file employees in investing the pension assets of defined benefit plans. We construct a direct measure of employees' risk attitude from their defined contribution pension portfolio allocations. We find that firms with more risk-averse employees exhibit higher sensitivity to their own default risk in their defined benefit pension investment. The reduction in pension risk taking induced by sponsor risk is more pronounced for low R&D firms, and in the period with stringent pension regulation. We further show that sponsors consider employees' risk aversion in making pension investment decisions regardless of the power of labor union. Overall, our findings suggest that firms incorporate employees' risk attitude into corporate policies.

Original languageEnglish
Pages (from-to)261-274
Number of pages14
JournalJournal of Corporate Finance
Publication statusPublished - Feb 2018

Scopus Subject Areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

User-Defined Keywords

  • Bankruptcy
  • Labor
  • Pension asset allocation
  • Risk aversion
  • Risk taking


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