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 journalJournal articlepeer-review

    14 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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