Family Firms and Employee Pension Underfunding: Good Corporate Citizens or Unethical Opportunists?

Abstract

This study draws upon the behavioral agency model and the concept of socioemotional wealth to investigate how family firms’ employee pension underfunding decisions differ from those of non-family firms. We explore how these differences are influenced by financial distress, generational stage, and whether the firm is eponymous. We test our hypotheses using data from 452 US firms over an eleven-year period. Our results suggest that family firms are less likely to underfund pensions, but this effect is attenuated in later generational ownership stages and in non-eponymous firms.