Pension plan risk-taking: does it matter if the sponsor is publicly-traded?

We use a large sample of defined benefit (DB) pension plans to document economically significant differences in the risk-taking of plans sponsored by privately-held versus publicly-traded firms. The magnitude and the main determinants of pension plan risk-taking are different for public and private firms. The effect of pension liabilities' funded status on risk-taking is two and a half times higher for plans with publicly-traded sponsors than for plans with private sponsors. In contrast, changing sponsor contributions has more than four times higher effect on risk-taking for plans with private sponsors. The results suggest that the alignment of incentives for the stakeholders in a pension contract is different for plans sponsored by private versus publicly-traded firms.