2005 Fiscal Year Final Research Report Summary
Determinants of Defined-Contribution Japanese Corporate Pension Coverage
| Project/Area Number |
15530263
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Business administration
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| Research Institution | NAGOYA CITY UNIVERSITY |
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Principal Investigator |
YOSHIDA Kazuo NAGOYA CITY UNIVERSITY, Graduate School Of Economics, Professor, 大学院・経済学研究科, 教授 (30240279)
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| Project Period (FY) |
2003 – 2005
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| Keywords | Corporate Pension Plan / Defined Contribution Plan / Incentives / Unfunded Liability / Empirical Analysis |
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| Research Abstract |
The passage of the 2001 Corporate Pension Legislations in the Japanese Diet (Parliament) has introduced voluntary defined contribution (DC) pension plans for the first time in the Japanese corporate pension system.
The paper is motivated to assess the empirical determinants of the initial decision by Japanese corporations to adopt DC plan. The explanatory variables we examine are a)the firm size in terms of the number of employees, b)cumulative pension assets in the existing defined benefit (DB) plans, c)the extent of under-funding of the firm' s existing DS plans, d)the firm' s leverage (debt/asset ratio) in its capital structure, e)profitability of the firm, f)average wages paid by the firm, g)the extent of unionization, h)the average age of workers, and i)the job turnover rate of the industry to which the firm belongs. We employ the logit model for the estimation, assessing the probability of the initial adoption on the basis of these variables. The key findings are that the likelihood of adopting DC plan increases with an increase in the firm size, as well as with an increase in the profitability of the firm, the amount of existing DB pension benefits accumulated per employee, and the firm' s debt/asset ratio. In addition, the likelihood of adopting DC plan declines with an increase in under-funding of the existing DB plan, as well as with an increase in the average age of employees. We find that it is mainly large, profitable corporations with substantial accumulated DB obligations that are offering new DC plans, in sharp contrast to the American corporate incidence of DC pension.
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