- UID
- 218217
- 帖子
- 493
- 主题
- 94
- 注册时间
- 2011-5-26
- 最后登录
- 2012-9-12
|
4#
发表于 2011-7-13 16:24
| 只看该作者
You seem to be confused about several concepts.
>Less shareholder equity risk leads to higher market value of equity and thus a lower D/E
No, it does not lead to higher value. It leads to a lower beta but same value.
-------------------------------------------------------
> As I understand, if the plan is fully funded, then
> increasing pension plan investment in debt results
> in pension equity investment getting reduced
> because there is no pension shareholder equity
> (surplus).
The above sentence mixes several things together. Pension surplus has nothing to do with whether the plan invests in equity or debt.
> Accordingly, the company's total (operation +
> pension) debt will increase and equity will
> decrease. Does this seem right?
Again, confusion here. Pension plan investing in debt (ie. bonds) is on the asset side of the balance sheet. Pension DEBT is the company's OBLIGATION to its employees.
To answer your question: if the company chooses to invest more in debts (bonds) in its pension plan, its own equity's beta decreases but the size stays the same. If the company want to keep the same equity beta, it can borrow more money.
Important to remember: the TOTAL asset size (operation+pension assets) = TOTAL liabilities (pension obligations + operational debt+ equity) |
|
