Abstract
I find evidence consistent with opportunistic bankruptcy filings by firms who sponsor defined benefit pension plans. My data shows that $1 of pension liability is a stronger predictor of corporate bankruptcy than $1 in non-pension liability. Pension plan sponsors spend longer in bankruptcy, thus avoiding required contributions, and shop for favorable judicial forums. In addition, pension underfunding is the primary predictor of PBGC trusteeship. This creates poor incentives for firms to fund pension plans. These results are particularly troublesome given the poor funded status of many pension plans and the substantial deficit at the PBGC.
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