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Title: |
Corporate Financial Policy with Pension Accounts: an Extension of the Modigliani-Miller Theorem |
| Author: |
Kim, Chongmin |
| Author
Affiliation: |
Kookmin University |
| Source: |
International Economic Journal, June 2004, v. 18, no. 2, pp. 215-236 |
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Publication Date: |
June 2004 |
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Abstract: |
We build a model of an incomplete market economy with a firm, which we apply to the study of corporate financial policies with pension accounts. We show that prior to ERISA, even though the spnsoring firm's integral financial policy is neutral for its market value, it may affect the economy by creating a pension call option. On the other hand, in the post-ERISA periods, the firm's financial policy is not only neutral for its value but also has no real effect on the economy. Thus, the Modigliani-Miller theorem is valid in this sense. |
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