Does the Performance of Pension Plans Affect Firm Investment of Dutch Sponsoring Firms?
Author: G.C.A. van Asch 30/01/2019 Student number: 1099442
University of Twente
Master thesis Business Administration Track: Financial Management
1st Supervisor: dr. X. Huang 2nd Supervisor: Prof. dr. M.R. Kabir
Abstract:
This study aims to investigate if pension funds impact their sponsoring firms. This study is performed using a data set of 36 Dutch non-financial listed firms over the fiscal years 2014 through 2016. An OLS linear model is used to investigate whether coverage, contribution, pension fund maturity, or pension plan type (DB, hybrid, or DC), as aspects of pension funds, affect firm investment. The results of this study do not support any of the hypothesised relationships. Hybrid pension plans appear to be the most common pension plan type, implying that a dichotomous view of only regarding DB and/or DC pension plans may not accurately represent the situation.
Table of content
I. Introduction ... 1
Research question ... 2
Academic and practical relevance ... 2
Structure ... 4
II. Literature review and institutional background ... 5
a. Pensions in the Netherlands: the three pillars ... 5
b. Private pension plans: DB vs. DC... 7
c. Variations of pension plans: conditional DB and collective DC ... 8
d. Impact of pension plan on sponsoring firm ... 9
III. Hypotheses development ... 17
a. Coverage ... 17
b. Contribution ... 17
c. Fund maturity ... 18
d. Pension plan type ... 19
e. Hypotheses overview ... 20
IV. Research method ... 21
a. Multiple linear regression ... 21
b. Variables ... 22
c. Hypotheses testing ... 25
d. Endogeneity ... 26
V. Data ... 27
a. List of sponsoring firms ... 29
b. Descriptive statistics ... 29
c. Correlation ... 33
VI. Results ... 34
VII. Conclusion, recommendations, and limitations ... 37
References ... 42
Appendix A: List of firms on the AEX ... 47
Appendix B: List of firms used in the study ... 48
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I. Introduction
Provisions for the future, to work now and save up for when you want to retire from working, that is the essence of a pension. Aspects, such as culture can affect at which age a person retires, this leads to different norms regarding the retirement age per country. In the Netherlands the age at which people retire has been increasing over the past decade, reaching an average of 64.4 years in 2015 (CBS, 2016). This is just slightly above the average of member nations of the Organisation for Economic Co-operation and Development (OECD), where the average age is 64.0 (OECD, 2015)
In the coming 35 years the proportion of citizens older than 60 is expected to nearly double, almost reaching a quarter of the world‟s population by 2050 (World Health Organisation, 2015). This aging process creates problems for pension plans, such as how to finance an increasingly aging population, which have been debated since the early 1990‟s (Schieber &
Shoven, 1994). Such concerns regarding pension plans remain current. This can be seen in a multitude of areas, for example: political agendas (Bruijn, et al., 2017), newspapers (König, 2017), government media (Rijksoverheid, 2016), and it often has a significant chapter within most corporate annual reports1. The combined aging population, and current interest in pension plans indicate a societal demand to investigate further into pension plans and their working.
At the beginning of the century the equity markets were in a poor state, leading to pressure upon pension funds, which resulted in a sharp fall in the funding ratios of pension plans (Boeri, Bovenberg, Coeure, & Roberts, 2006). As a reaction to this pressure, changes were made to the pension plans. A shift from a Defined Benefit (DB) pension plan to different types of plans, of which a Defined Contribution (DC) pension plan seems the most predominant (Poterba, Rauh, Venti, & Wise, 2007). This thesis will focus on the different pension plans types (DB, DC and hybrid) and their effects upon the associated firm. The nuances regarding these two plans, and hybrid plans, will be discussed in the next chapter. In short, the main difference is that in a DB plan the responsibility lies with the firm and in the DC the responsibility lies with the employee. A relation between the health of a DB pension plan and the value of a firm has already been found in the United States (Franzoni & Marin, 2006). At the base of this stands that the firm is ultimately responsible for the financial health
1 For example: the annual report of Ahold has a chapter dedicated to the pension plans of its employees, showing its importance to the company (Ahold, 2015).
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and survival of the pension plan (Franzoni & Marin, 2006). This thesis investigates whether a similar relation also exists in the Netherlands, and, more importantly, whether with the implementation of DC pension plans, this relation decreases in strength or disappears. This would be expected because with a DC pension plan the responsibility no longer lies with the firm.
Extensive institutional differences between the Netherlands and other countries, such as the U.S.A., where much research has been done on the topic, exist. An example of such an institutional difference is mandatory participation of employees to pension plans when offered by the firm.
The aspects of pension plans that will be investigated regard the performance of the plans, such as the coverage ratio. In order to investigate its effect upon the sponsoring firms, it is necessary to have a specific aspect of these sponsoring firms as a measure. This aspect will be firm investment. This is chosen because firm investment has shown to be a way to indicate firm performance and the market value of the firm (McConnell & Muscarella, 1985), (Liao, Lin, & Lin, 2016).
Research question
In order to assess the relationship between the pension plans and the sponsoring firm, the research question used for this study is as follows:
“Does the performance of pension plans affect firm investment of sponsoring Dutch firms?”
Academic and practical relevance
The academic relevance of this study is centred around three arguments. Firstly, the vast institutional differences between different countries. Secondly, the amount of funds present in the pension funds, relative to the country‟s economy. Thirdly, investigating a different relationship, namely exploring the effects of the pension fund upon the sponsoring firm instead of the effects of the sponsoring firm upon the pension fund.
Institutional differences. In the United States of America extensive research has been performed investigating the relationship between firms and their sponsoring pension funds, this on multiple topics such as tax shielding (Shivdasani & Stefanescu, 2009), investment policies (Rauh, 2009), and pension plan funding (Franzoni & Marin, 2006). These have mainly focused upon the impact a firm has on its sponsoring pension fund, because the firm
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is usually responsible and in control of the pension fund. An example of this control is that, to some degree, the sponsoring firm has the capability of appointing the board members of the pension fund. While multiple differences exist between the U.S.A. and the Netherlands, there are two main institutional differences to note. Pension funds in the Netherlands are governed by a board of directors that is made up by both the employer and the employees, half of the board is appointed by the firm and half by the employees. Having the board of directors made up by the employees and the employer, limits the control and influence of the sponsoring firm upon the pension fund. Since in the Netherlands the limit is more present than in the U.S.A., it is increasingly interesting to investigate the relationship between the pension fund and the firm from a different angle. In other words, in the U.S.A. there exists a power asymmetry between pension fund and sponsoring firm, where the firm clearly has the most control over the other, while this asymmetry does not, or at least in a lesser amount, exist in the Netherlands. Next to that the participation in a corporate pension plan, meaning a pension plan organised through an employer, is mandatory in the Netherlands, meaning that if the firm proposes a pension plan all employees are obliged to participate in it (Chen & Beetsma, 2015). This leads to a higher amount of participation than in the U.S.A. which may change the relationship between the pension fund and the sponsoring firm. In the U.S.A. employee participation in a pension fund is close to 64% (Karamcheva & Sanzenbacher, 2014) whereas in the Netherlands participation is approximately 90% (OPF-VB, 2010). One may wonder why participation is only 90%, and not 100%, when it is mandatory. This is because participation is mandatory only if a firm offers a corporate pension scheme. If a firm does not support such a pension, this policy does not apply.
Secondly the sheer size of the sum total of pension fund assets. In the Netherlands the amount of assets collectively owned by the pension funds is large. Compared to the GDP of the nation it amounted to 105.9% in the year 2000, and amounts to 178.4% in the year 2015 (OECD, 2016). Employers and employees alike contribute to the pension funds, which has grown over the years, making it interesting to investigate whether a relation exists between the funds and the firms sponsoring it. This implies that pension funds represent an increasingly large part in the Dutch economy, which in turn makes it increasingly important to understand and explore the roles that these pension fund play and what impacts they may have upon their sponsoring firms.
Lastly the relationship researched. Much research done regards the impact of the sponsoring firm upon the pension fund. This is expected because most research is done in the USA
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where the firm has extensive of control over the pension fund. Investigating how the investment and funding policies of a sponsoring firm affect their pension plan is an example of this (Shivdasani & Stefanescu, 2009). Because the relationship between sponsoring firm and pension fund seems to be different in the Netherlands it would be contributory to investigate the reverse relationship: how the pension plan influences the firm.
Structure
This study will start by examining literature and the institutional background of pensions in the Netherlands, in section II. Then it will develop hypotheses in sections III., and a method to test these in section IV. The data used by this study will be presented in section V., from this, in subsequent section VI, will follow the results of applying the said method. Finally this study will present its conclusions, recommendation and end by explaining its limitations in the final section, section VII.
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II. Literature review and institutional background
a. Pensions in the Netherlands: the three pillars
Pension plans are a way for firms to recompense employees and for employees a way to secure their financial situation for later years. When looking at pension plans in the Netherlands the system is broadly made up of three pillars (Rijksoverheid, 2016).
The first pillar is a government funded pension (called the AOW2). This is a basic, semi-flat pension that is available to all retirees. It is considered semi flat because the amount received is in principle flat, but can be affected by a few factors such as if the retiree has contributed to the fund (and for how long). It is seen as a basic pension which can deliver only the most basic needs of a retiree.
The second pillar is a private (corporate) pension plan. This is a collective pension in cooperation with employers. This is a pension plan where both the employer and the employee regularly contribute (in the form of payments) to a pension fund, which at the agreed upon time will provide a pension to the retiree (called a benefit). This pillar can be sub divided in company-wide and industry-wide pensions. The company-wide pension fund would be specific for one company, while the industry-wide pension fund is used by multiple firms for their employees in a specific industry branch.
The third pillar is the personal savings of the retiree. Individuals can save or invest themselves, in order to supplement the other two pillars.
This study aims at investigating the relationship between firms and their sponsored corporate pension plans. The government funded pensions and the personal savings, namely pillars one and three, do not regard the employers nor their contribution directly3 and therefore will be left out of consideration.
In the Netherlands it is common for firms to offer a collective pension scheme to employees, these are usually either an industry wide pension fund or a companywide pension fund. When such a plan is offered employees are required to participate. This has resulted in 9 out of 10 employees having such a collective pension plan (OPF-VB, 2010). This gives the Netherlands the second highest participation rate of Europe, closely second to Sweden (Ebbinghaus, 2015).
2 “Algemene Ouderdoms Wet”, which roughly translates to “general elder law”.
3 It could be argued that by paying taxes a firm contributes (in part) to the public pension scheme.
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In principle, funding done by the firm to the pension plan is tax deductible for the firm. The (tax deductible) pension fund contribution is set by the pension fund and has some limitations, this is in order to make sure that the sponsoring firm does not abuse the tax break upon pension contribution. Since half the board of the pension fund is made up by the employees (the other half is appointed by the sponsoring firm) it is not easily done to change the contribution rate in favour of (only) the firm. However, if a sponsoring firm is in distress and the pension fund is overfunded4 there is a possibility for a contribution refund (Davis &
de Haan, 2012) (with approval of the pension fund board of directors). This means that firms are motivated to keep their pension funds well-funded.
Together the high level of participation and the high level of funding leads to the Netherlands having, in relative terms, the world‟s largest pension fund system, amounting to €1055 billion in 2014, which represents approximately 178.4% of Dutch GDP (OECD, 2016). In order to adequately manage these funds any pension fund is required to be a separate (from the firm) legal entity, governed by its own board of directors. As mentioned before, the board is made up by both employers and employees. It is expected and required that the board acts in the interest of the pension fund and independently from the firm. The pension fund needs to operate in the benefit of all participants to the fund. Within the Netherlands two main types of pension plans are observed: a plan where the resulting pension benefit for the employee is defined, defined benefit (DB) and a plan where the required contribution of the participants is defined, defined contribution (DC). The benefit that is defined in a DB pension funds is setup in such a way that the retiree would receive a certain percentage of the last earned pay (final pay) or a percentage of the average earned pay (average pay).This study aims to investigate how these different types of pension plans effect the firm that they are linked to.
When examining the differences between companywide pension funds, and industry wide pension funds, empirical evidence suggests that industry wide pension funds are more efficient that their firm wide counterparts (Bikker & de Dreu, 2009). The benefits of having a firm wide pension fund is that it could provide specific advantages to the firm, mainly cantered around more control and a stronger relation between the pension fund and its sponsoring firm. This could result in more discretion regarding adjusting firm contributions, leading to advantages such as improved tax shielding (Broeders, 2006).
4 Which means that the pension fund has more assets than liabilities, specifically when taking into account future income/expenses related to pensions.
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Within the corporate pension plans, namely the second pillar, broadly speaking, two types of plans exist: defined benefit (DB) and defined contribution (DC). The difference between these two types is the responsibility division between the employer (the firm) and the employee. With a DB plan the firm is responsible for creating a pension fund that will ensure a certain amount of pension benefit after the employee retires. This amount is often either final earnings based or career average based. This means that the benefit that is defined for the future retiree is based upon a certain percentage of either the final pay or the average pay.
Combinations of both final and average pay exist but are rare (Ponds & van Riel, 2007). With a DB plan the firm is responsible for the pension plan and its performance, meaning that the firm is responsible for delivering the agreed upon pension benefit upon the retirement of the employee. For example in a DB plan if the pension fund is performing badly and cannot pay the required pension benefits the employer is obliged to financially support the pension fund.
With a DC plan the responsibility for the fund is with the employee, each month both the employer and the employee pay a defined contribution into the pension fund, where the employer often “matches” the employee (Choy, Lin, & Officer, 2014). This fund is then the responsibility of the employee. Consequently the employee has a greater say in where and how his or her pension savings are invested and managed. Summarising with a DB plan the main responsibility lies with the firm and for a DC plan the main responsibility lies with the employee.
Empirical research done regarding the changes in the private pension plans show a trend of a decrease in DB and the increase in DC pension plans, as seen in the U.K. (Clark & Monk, 2006), and the U.S.A. (Ghilarducci & Sun, 2006), (Poterba, Rauh, Venti, & Wise, 2007), (Sialm, Starks, & Zhang, 2014). This is also observed in the Netherlands (Ponds & van Riel, 2007). The findings reveal a few important aspects specific for Dutch pension plans. Firstly, the amount of DC plans has been on the rise, while in 1998 DC plans represented less than 1% of total pension plan participants it represented 6.1% of participants in 2005. Secondly within the DB pension plans another significant change has happened, the focus has shifted from final pay to average pay. While 66.5% of DB plans were final pay in 1998, only 10.6%
still were in 2005. The empirical data also shows that the DC focus is larger with companywide pension plans than with industry wide pension plans (8.5% versus 2.7% when looking exclusively at DC plans). There has also been a rise in the amount of hybrid plans
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(Ponds & van Riel, 2007). These are pension plans that are neither completely DB nor completely DC plans.
c. Variations of pension plans: conditional DB and collective DC
While the most prominent type of pension plan in the Netherlands is a form of defined benefit plan (OPF-VB, 2010), the so called “true DB” is less common, instead there are a multitude of different hybrid plans (Chen & Beetsma, 2015). Of these hybrid plans, the conditional defined benefit plans are the most prominent in the Netherlands (Bikker & Vlaar, 2007), abbreviated to CDB. It is composed of two main parts: a nominal benefit and a conditional indexation. Per individual pension fund the specific conditions and indexations may differ. It is mandatory for each pension fund to clearly communicate to its participants what its goals are (regarding the indexation) and how achievable they are. This means that if the pension fund performs poorly there will be little or no indexation, but if the pension fund performs well there can be full indexation. The amount of possible indexation and contribution required is linked to the coverage ratio of the pension plan. In such a case, the coverage ratio is seen as an overall performance indicator of the pension fund. In order to illustrate how and what conditions apply for a CDB pension plan, two ladders have been added, see Table 1 for an example regarding indexation and Table 2 regarding contribution. Here it is observable that not only the indexation of a pension plan is affected by coverage, but also the contribution of the participants. This can go as far as contribution restitutions if the coverage ratio achieves a high enough percentage.
Table 1: Example of policy ladder for conditional DB pension plan regarding indexation. Adapted from (Bikker &
Vlaar, 2007).
Funding ratio (in %) Indexation Under 105 (nominal) No indexation
105 (nominal) – 105 (real) Indexation cuts decline linearly
105 (real) – 120 (real) Full indexation; no compensation for previous cuts Over 120 (real) Full indexation; with compensation for previous cuts
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Table 2: Example of policy ladder for conditional DB pension plan regarding contribution. Adapted from (Bikker &
Vlaar, 2007).
Funding ratio (in %) Contribution
Under 105(nominal) Based on a 1-year recovery plan, maximum increase 10 percentage points per annum
Under 124.5 (nominal) or 110 (real)
Based on 15-year recovery plan, no reduction, maximum increase 3 percentage points
110 (real)/124.5 (nominal) – 120 (real)
Actual cost, maximum annual change 3 percentage points
120 (real) – 140 (real) Linear reduction of contribution to zero, maximum annual change 3 percentage points
140 (real) – 175 (real) Zero contribution (or 3 percentage points lower than last year)
Over 175 (real) Contribution restitution
Another prominent pension plan in the Netherlands is the collective defined contribution pension plan, abbreviated to CDC. This plan is in principle a DC plan where all the management of the contributions are done collectively by a collective DC fund. Here participants to the plan give up some responsibility for their pension to the collective DC fund, which sets the target benefit and the contribution from participants. If the fund performs well it can increase benefits (for participants), and if the fund performs poorly it can decrease benefits (for participants). The amount and limitations of increase and decrease of contribution and benefits may vary according to the fund specific agreements. This in order to attempt to keep the coverage ratio just above 100%. Empirical evidence suggests that a collective DC plan results in better investment performance which leads to increased benefits before and after retirement (Wesbroom, Arends, & Hardern, 2013). While this seems to resemble a DB or conditional DB plan it is significantly different, mainly there is no guarantee of the target benefits by the sponsoring firm.
d. Impact of pension plan on sponsoring firm
At first glance it would seem that there is little to no relation between a DB pension plan and its affiliated firm because the pension plan is run by an independent board of directors that should have only the interests of the fund in mind. In practice this is not entirely the case,
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there are multiple empirical findings that suggest a relationship between the firm and especially the DB pension plan (for example (Duygun, Huang, Qian, & Tam, 2018)). Firms are directly linked to the assets and liabilities of its DB plan. With a DB plan the main responsibilities lie with the firm, meaning that the liabilities and assets of the pension plan are indirectly linked to the firm. For example, in the case of bankruptcy or financial difficulties, the DB pension fund has a senior debt claim upon the sponsoring firm, showing the responsibility of the firm (Webb, 2007). Empirical evidence suggests that in such cases the highest burden lies upon the sponsoring firm (Adrjan & Bell, 2018). Whereas in the U.S.A.
there exist the possibility of insuring the DB plan with a government organisation (Pension Benefit Guaranty Corporation), this possibility does not exist in the Netherlands.
On average the assets of a DB plan represent 62% of the market value of a firm and 16.4% of recorded assets (Shivdasani & Stefanescu, 2009). Leaving this out of consideration for any firm seems unexpected, especially because Franzoni and Marin (2006) found a relation between the health of the pension fund and stock market value and returns of sponsoring firms. In the U.S.A. underfunded DB pension plans appear to negatively impact the value of the firm on the stock market, although this is relatively less the case when the pension fund is severely underfunded because the severity of the underfunding is often undervalued (Franzoni & Marin, 2006).
Regarding the DC pension plan, the responsibilities are different than with DB pension plans.
With DC pension plans the firm is only responsible to contribute a certain amount of funding to the pension plan, the responsibility for the performance of the plan, and ultimately for the pension benefit lies with its board and the employees. This means that it is expected that the relationship between pension funds that is observed with DB pension plans would not occur with DC pension plans. This is seen as a motivator for firms to shift from DB pension plans to DC pension plans.
It is important to note a relationship between pension funds and non-sponsoring firms that will not be taken into account in this study. That is the influence pension funds have when they invest into a firm (Clark & Hebb, 2004), which they do as institutional investors (Sievänen, Rita, & Scholtens, 2013). While this relationship has empirically been shown (Del Guercio & Hawkins, 1999), it is considered by this study as a different relationship. This due to it being a relationship between an investor and its investment (Lakonishok, Shleifer, &
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Vishny, 1992), which could be characterised as institutional ownership (Hartzell & Starks, 2003).
Impact on firm debt
The funding level of a pension fund has impact upon the operating of its sponsoring firm, this can be seen in multiple ways and originates from the fact that pension debt can compete with other debt claims (Rauh, 2009). Firms can take on debt for many reasons, mostly in order to finance operations which would or should lead to increased value to the firm, at least more than the cost of owning the debt is (if not a firm would have a bad investment). Taking on debt or not regards the capital structure of a firm. All debt has a claim on assets or funds, if there are not enough assets to fulfil all debt claims, for example in the case of a bankruptcy, some debt can have priority over other debt, pension debt for example often has a senior debt claim5 on its sponsoring firm (Webb, 2007).
Pension debt can be considered a special type of debt for three main reasons. The first reason is that it has a debt claim which is often a senior claim (Rauh, 2009), without actually providing funds to the sponsoring firm. Secondly, since it can compete with other debt it can be seen as a risk to the sponsoring firm, therefore if the pension fund has a coverage below 100% it increases the risk a firm faces. This has been observed to lead to a decrease of the risk rating of the sponsoring firm (Carroll & Niehaus, 1998) and to an increase of shareholder returns as a compensation for that risk (Jin, Merton, & Bodie, 2006). Thirdly the pension debt directly influences capital decisions such as leveraging, with a low pension fund coverage ratio the sponsoring firm will likely take on less other debt (Rauh, 2009).
Where pension funds have low coverage, the pension fund has more liabilities than assets, and these extra liabilities are seen as extra debt of the sponsoring firm and in increase firm risk, logically if the pension fund has high coverage the extra assets could be seen as extra assets and decrease risk for the firm. This positive relationship can indeed also be seen in all three relations, namely risk (Carroll & Niehaus, 1998), shareholder return (Jin, Merton, &
Bodie, 2006) and capital structure (Rauh, 2009). It is however important to note that this relationship seems to be asymmetrical, here additional pension debt has more impact than additional pension assets (Carroll & Niehaus, 1998). This means that the negative effect of low coverage upon the firm seem to be larger than the positive effects of high coverage. The
5 Senior debt claim: under certain circumstances it has priority over other (non-senior) debt claims.
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logical argument behind this asymmetry is that the firm does not have direct access to the excess assets of a pension fund with high coverage.
Sponsoring firms tend to integrate the situation of their associated pension fund into their overall financial management decisions (Bartman, 2018). Leverage is an aspect of the way the capital of a firm is structured. Leverage regards the relative amount of debt a firm has. If a pension fund has significant over or underfunding this could impact the amount of debt a firm is willing to take on. For example if a pension plan would be severely underfunded, it would have much more debts than assets. If it were a DB pension plan, then the sponsoring firm would be liable for this excess debt. The firm would be incentivised to take on less debt of its own, having the excess debt of the pension plan in mind. Thereby the pension plan coverage would be influencing the capital structure (here amount of debt) of the sponsoring firm.
Empirical evidence from the U.S.A. has shown that firms do integrate the situation of their pension fund when making decisions regarding their leverage (Shivdasani & Stefanescu, 2009), when the coverage ratio is lower it will lead to a lower leveraging of the firm. While this has only been investigated with DB pension plans, it is interesting to investigate whether or not this also applies to other pension plan types.
Tax shield
Funding a pension plan has a tax shielding effect for the firm, this is an incentive to invest into the pension plan. While this tax deductibility can change depending on the situation, it does influence the way a firm decides whether or not (and if so how and how much) to contribute into the pension plan (Webb, 2007). In the Netherlands, specifically, the contributions of a firm to its pension fund is tax deductible. However, there is a maximum on the tax deductible contribution amount, this depends on the type of pension given and the financial health of the fund (Davis & de Haan, 2012). The following example illustrates this relationship: if the coverage ratio of a pension fund is below 100% coverage it would allow for a higher tax deductible contribution, incentivising firms to invest more into the pension fund (and by extent less to other sources). The other way around is similarly illustratable: if a fund is overfunded (coverage ratio higher than 100%) the tax shield would be lower (as the allowed tax deductible contribution could be limited), therefore a firm will be incentivised to invest more into other activities and less into the pension fund.
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Overall, in the U.S.A., the tax benefit of pension plans amounts to 1.5% of firm value on average (Shivdasani & Stefanescu, 2009), this shows that the tax shield received by any firm can easily amount to a significant sum. In any situation a pension fund is a drain on the finances of a firm: the firm has to contribute. With the DC plan the firm has a fixed contribution, for which the firms can easily plan. With the DB pension plan the firm may need to increase its contribution drastically if the pension fund performs poorly, this may lead to becoming a heavy burden upon the finances of the firm, as it can be an unstable and sometimes unreliable but mandatory cash flow.
It is suggested that firms with underfunded pension funds will contribute significantly more in order to maximise their tax shielding, while firms with overfunded pension funds will contribute less (Falkenheim, 2016).
Firm investment
The aspect of Dutch firms that will be examined by this study will be firm investment, also known as capital expenditure. Firm investment represents the amount of money a firm invests in itself, this can have multiple purposes such as acquiring new assets or maintaining existing assets. Firm investment has shown to have extensive impact upon the firm performance and market value of the firm (McConnell & Muscarella, 1985), (Liao, Lin, & Lin, 2016). Higher firm investment leads to asset growth, which strongly relates to increased stock market return (Cooper, Gulen, & Schill, 2008), which suggests that firm investment could be used as an indicator of firm performance. Liao, Lin and Lin (2016) actually use capital expenditure as an indicator for the performance of firms, implying that a positive relationship exists between capital expenditure and firm performance (Liao, Lin, & Lin, 2016). In other words, firm investment will be used by this study as the way of measuring how the firm is affected. The reasons why firm investment is chosen is twofold. Firstly because of the practicality of having one measure of overall firm performance. Secondly it is because the hypotheses directly influence firm investment. This is explained in further detail in the next section, regarding hypothesis development.
Firm investment rests upon two pillars: the opportunity to invest and the capabilities to be able to finance the investment. In order for a firm to invest, it needs to identify an investment opportunity and it needs to be able to finance that opportunity. Therefore the two aspects of
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firm investment are opportunity and financing6. See Figure 1 for a visual representation of these determinants. In order to finance that opportunity it needs funds, these are done either internally (for example through retentions of profits and internal cash flows) or externally (by arranging financing from outside the firm). Of these two options it has been suggested that retentions of internal cash flows (internal financing) is the most dominant form of financing (Cleary, 1999). It has also been suggested that of the external financing possibilities, bank loans seem to be the primary source, other sources such as securities seem to be considered non-substantial (Mayer, 1990). According to both Mayer (1990) and Cleary (1999) internal cash flows are the main source of firm investment. This means that any effect a pension fund may have upon those internal cash flows, such as paying contribution, or compensating shareholders for increased pension fund risk, will directly reduce available internal cash flows and thereby impacting firm investment.
Figure 1: Visualisation of the determinants of firm investment.
Few literature so far has been found to research the relationship between the pension fund and firm investment. However research that has been found (Sasaki, 2015) to investigate that relationship, has found that pension deficits has a strong negative impact upon firm investment and that it increases firm cash reserves, suggesting that the sponsoring firm reacts to the pension fund (Sasaki, 2015). It is however important to note that this precise study only regards DB pension funds and disregards all other forms of pension plans.
6 This division is used in (Badertscher, Shroff, & White, 2013) for example
Firm Investment
Opportunity Financing
Internal
External
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While all hypotheses will investigate an impact upon the capital expenditure of the sponsoring firm, there is a recurring theme of being slightly different for different types of pension plans. While almost all studies referred to in this study only or mostly regard DB pension plans and disregard any other pension plans, this study will aim at also investigating these relationships within the frame of pension plans with less firm responsibility (CDB and CDC pension plans) and with (almost) no firm responsibility (DC pension plans).
Overall it is possible to hypothesise that pension plan aspects that represent an increase in risk, such as lower coverage or lower maturity, will increase the risk the firm represents, and therefore negatively affect the firms external financing possibilities and costs. In contrast, aspects of pension funds that affect cash flows, such as contribution, will mainly affect the internal financing capabilities of the sponsoring firm.
Mergers and acquisitions
Pension funds also have an impact when it comes to mergers and acquisitions, they can take on one of two roles, as an institutional investor (Andriosopoulos & Yang, 2015), or as the pension fund of the firm that is a target for the merger or acquisition. The former of these two will be disregarded for this study, as it does not relate to the relationship of a sponsoring firm and its associated pension fund. The latter will be elaborated upon here.
If a firm merges or acquires another firm, they will also have to deal with the pension fund used by that firm. This can be done in multiple ways, including not changing the pension fund at all, ending up with two pension plans for the different employees from the two different original firms. Another option would be to merge the pension funds of firms involved. There exist many different ways for firms to handle this pension situation, these depend on the specifics of that situation, and may vary greatly. Two examples to illustrate the possible variance follow. Firstly if firm A, from the Netherlands, is acquired by foreign company B. Assuming that company B has no form of pension plan for its Dutch employees, the simplest option may be to keep all Dutch employees with that same pension fund.
Thereby not significantly changing anything to the pension situation of the employees, but taking on extra responsibilities as a firm. Another example may be that two firms want to merge all their departments, believing to be stronger together. In such case it may be best to merge both pension funds, or to abandon one for the other. This wide variety of possibilities for the pension fund(s) after a merger or acquisition, show that these pension situations can become quite complex and case specific. This illustrates why pension liabilities can become
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so called “deal breakers” in the process of mergers and acquisitions, and take on an important role in merger and acquisition strategies (Brueller, Carmeli, & Markman, 2016).
Another look on this is the one of take over protection. This consist of manager adopting or purposefully keeping a pension plan where the firm responsibility is high, in order to make their firm a more difficult target for a takeover (Zhu & Zhu, 2016). Zhu and Zhu (2016) suggest that the reason managers would do this is for fear of having significantly less power within the company post-acquisition.
This effect of pension funds seems to be the case, especially for defined benefit pension plans. This is due to the pension fund becoming a liability if the firm has a high level of responsibility towards that fund. Research into mergers and acquisition in the U.K. supports this overall effect (Cocco & Volpin, 2013). It does not only show that firms that have a DB pension fund are less likely to become the target of an acquisition attempt, but it also shows that when an acquisition is attempted, that it will increase the likelihood of a non-successful acquisition attempt. Overall concluding that the uncertainty of pension liabilities acts as a takeover deterrent (Cocco & Volpin, 2013). Additionally it has been suggested that having a wider perspective, specifically including the pension situation (for example through the involvement of a human resources manager), in any merger or acquisition endeavour increases the chance of the pension fund being identified as an obstacle (Brueller, Carmeli, &
Markman, 2016).
Overall, when taking into account the multiple perspectives and effects of pension funds on the mergers and acquisitions process, it becomes clear that a certain relationship exists.
However it also become clear that an issue arises regarding the direction of the relation. And it appears to be a circular relationship. With that is meant that the pension fund impacts the firm, by being a possible deal breaker in any merger or acquisition. But in this regard the firm may very well also impact the pension fund, by using it as a measure of protection against takeovers. This could possibly be seen in multiple ways, such as the sponsoring firm‟s management keeping (or setting) a DB pension plan, instead of another pension plan type where the firm would have less responsibility. Mainly for this reason, the possible circularity, this relationship will be disregarded in this study.
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III. Hypotheses development
a. Coverage
The pension fund can be regarded as debt associated with the sponsoring firm7. The coverage ratio represents how much of that debt is without assets to cover it. Together this demonstrates that the coverage ratio is an indicator for the risk it represents to the sponsoring firm. When a pension fund has a lower coverage, it becomes a significant liability to its sponsoring firm, leading to increase firm funds being spend upon fixing the problem and compensating shareholders for the incurred additional risk (Jin, Merton, & Bodie, 2006). This suggests that there would be less funds available for investing into the itself and its growth, meaning a lower capital expenditure. Therefore a positive relationship between pension coverage and firm capital expenditure is expected. Recapitulating, a pension fund with a lower coverage ratio represents more of a risk to the sponsoring firm, thereby negatively impacting the possibilities for the sponsoring firm to finance their firm investment.
Examining the aspects of firm investment, coverage is hypothesised to impacts both internal financing (through cash) and the cost of acquiring external financing (through increased risk).
H1: The coverage ratio of a pension fund affects firm investment of the sponsoring firm positively.
b. Contribution
If and when pension funds require higher contributions from their sponsoring firms this will be a higher burden for the firm. Simply put any amount of money directed at pension fund contribution can therefore not be used by the firm as firm investment. Therefore the contribution of the sponsoring firm directly impacts its internal financing possibilities when regarding financing of firm investment.
If the firm has a strong responsibility towards the pension fund (such as a DB pension plan), it would have an incentive to divert firm funding from other activities towards the pension fund. The would mean that the sponsoring firm would have reduced funds that could be set towards capital expenditure, as these fund would be reallocated to the pension fund. This would imply a negative relation between the contribution to the pension fund and the capital expenditure of the associate firm. Overall the amount of contribution of the firm can be seen as a burden in fund allocation of the firm. If more funds go towards funding pensions, less
7 See section II.
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will be able to go towards capital expenditure. This has empirically been supported, especially when the contributions are mandatory this will lead to reduces firm investment (Rauh, 2006). Contribution directly affects the availability of internal cash flows, thereby impacting the firm investment aspect of internal financing of the sponsoring firm.
H2: The amount of contribution to the pension fund affects firm investment of the sponsoring firm negatively.
c. Fund maturity
The investment policy of pension funds represent the manner in which investment decisions are made, whether these are higher or lower risk investments. What exactly drives pension fund investment policy is quite complex, but one of the major aspects used to explain it seems to be fund maturity8. Pension maturity will be used in order to measure the risk a pension fund represents because of its investment policies. In order to represent the maturity of the pension fund the percentage of beneficiaries compared to the total number of participants is used. Participants of a pension fund can broadly be split into two categories, namely the contributors and the beneficiaries. Contributors pay contribution to the fund and do not (yet) receive any benefits. Beneficiaries are retired and do not contribute (any more) but only receive benefits. If a pension fund has a relative increase of beneficiaries it is considered more mature, as it has existed long enough for more contributors to retire and become beneficiaries. If the fund performs according to the plan, the beneficiaries have built up enough funds for them to receive their pension.
Regarding whether or not a higher maturity leads to less risk of the pension fund is a matter without unanimity. Overall it seems that more mature pension funds take less risk when investing, and therefore seem to constitute less of a risk, which seems to be the case regardless of pension plan type (Bikker, Broeders, Hollanders, & Ponds, 2012), (Cappelletti, Guazzarotti, & Tommasino, 2014), (Inkmann & Shi, 2015). This is often explained by the fact that the pension fund already has collected the funds over the years and has shifted the focus from attempting to grow towards becoming stalwarts of the money, keeping it secure for the beneficiaries. Although evidence suggesting that older, more mature pension plans have higher costs (Ghilarducci & Sun, 2006), this has not been found to significantly impact the risk the pension fund represents. Situations where increase maturity leads to an increase in risk seems to only appear with public pension funds in the U.S.A. (as opposed to Canada
8 For example used by (Boon, Brière, & Rigot, 2018)
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and European nations), where it is suggested that this increased risk is offset by the opportunity for a pension fund to insure itself (Andonov, Bauer, & Cremers, 2017). These exceptions do not seem to regard the pension funds investigated in this study, as such insurance opportunity does not exist in the Netherlands.
Overall this means that less mature pension funds would represent a significantly higher risk, which would result in higher investor compensation, such as increased dividends (Jin, Merton, & Bodie, 2006). This would in turn divert firm funds otherwise available for firm investment.
The literature review shows that when a pension fund represents a risk for the firm, be it direct or indirect, it will affect the firm (Jin, Merton, & Bodie, 2006). The way pension funds invest is hypothesised to not be any different in that aspect. If the pension fund is more risky, which can happen by investing into opportunities with increased risk, this will impact the sponsoring firm. This is because pension debt can be considered indirect firm debt, the risks associated with that debt depends on the investment policy of the pension fund. When regarding the context of this risk affecting the fir investment of the sponsoring firm, the affected aspect is the external financing. A higher risk of the firm means that external financing of capital expenditures will become more expensive, and therefore limit firm investment.
Relating this to the aspects of firm investment, pension fund maturity, as an expression of pension investment risk, affects the cost of external financing.
H3: The maturity of a pension fund affects firm investment of the sponsoring firm positively.
d. Pension plan type
When examining the previous three hypotheses it becomes clear that all three relationships are based upon the logic that the sponsoring firm is in some way and to some degree responsible for the pension funds. As discussed in the literature review, there exist different types of pension plans, with different amounts of responsibility towards the firm. Therefore it would follow that the strength or the relationships discussed in H1, H2, and H3 would be stronger when studying firms which have more responsibility and weaker when studying firms with decreased responsibility. Therefore it is hypothesised that the pension plan type has a mediation effect upon H1, H2, and H3. In order to take this pension plan type into account, pension plans will be divided into three categories, according to their relative levels
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of responsibility towards the pension plan, representing higher, medium and lower levels of firm responsibility. The higher category is for firms that mainly have DB pension plans. The medium category is for firms that mainly have hybrid pension plans. The lower category is for firms that mainly have DC pension plans. It is not uncommon for sponsoring firms may have different pension plan types at the same time, for example because they are shifting from a DB pension plan towards a DC pension plan. In such a case, the significance will be examined of the presence of the different pension plans, if a clear majority (≥80% of contribution) is of one specific type it will be categorised following that type, if there is a mix (no clear majority), the pension plan will be categorised as hybrid.
The three categories will be as follows: DB (representing higher firm responsibility), hybrid (representing medium firm responsibility), and DC (representing lower firm responsibility).
H4: The type of pension plan has a mediating effect upon the relationship between the pension fund and the sponsoring firm, where higher (lower) degrees of firm responsibility will lead to a stronger (weaker) relationship.
e. Hypotheses overview
Table 3: Overview of the three main hypotheses and the mediating hypotheses
H1 : Coverage The coverage ratio of a pension fund affects firm investment of the sponsoring firm positively.
H2 : Contribution The amount of contribution to the pension fund affects firm investment of the sponsoring firm negatively.
H3 : Fund maturity The maturity of a pension fund affects firm investment of the sponsoring firm positively.
H4 : Plan type The type of pension plan has a mediating effect upon the relationship between the pension fund and the sponsoring firm, where higher (lower) degrees of firm responsibility will lead to a stronger (weaker) relationship.
Table 3 shows an overview of the different hypotheses investigated in this study.
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IV. Research method
a. Multiple linear regression
In order to investigate the relationship between firm performance and pension plan performance a multiple linear regression model will be made. It will incorporate the effect each hypothesis has upon capital expenditure and consider control variables regarding firm investment and firm size. These control variables serve mainly to control for the operating performance of the sponsoring firms (for example return on assets) and the long-term liabilities of the firm (for example firm leverage). This model, and more specifically the used control variables, are based on multiple other studies (Richardson, 2006),(Liao, Lin, & Lin, 2016 ,(Deng, Jiang, Li, & Liao, 2017),(Vithessonthi, 2017).
The linear regression model used in this study, for firm i, with ε representing the error, is as follows:
The linear regression is used as it attempts to explain one (dependent) variable by a multitude of other different (independent) variables. There is only one dependent variable and multiple independent variables, because of that one may speak of a univariate multiple linear regression. The reasons a linear model is revolves around the relative simplicity and ease of its use, and that the literature consulted to make the model all seem to use it. While the model used is strongly inspired by literature using similar methods to investigate firm investment, it is imperative to test the assumptions before implementing the model. For a multiple linear regression most of these, such as homoscedasticity and multicollinearity, can and will be tested using SPSS. There is a logical argument to be made regarding the possible correlation between coverage and contribution (Rauh, 2006), namely that if contributions are higher this would or at least could result in a better funded pension plan, which would mean a higher coverage. This being an example on why it is important to investigate the assumptions.
There is a logical argument to be made regarding effects of the variables over the years, for example because a pension fund coverage usually increases or decreases steadily over multiple years. Larger firm investment decisions are also not done overnight, and investment can be done form multiple years. However the data collected in this study regards only three years, making this not feasible in this context. Next to that, using lagged variables, would
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require extensive investigation into the possibilities of the scope of the lag. At a first glance it seems to this study that the possibilities of what lag to use would depend to greatly on the specifics of the situation. Two examples of hypothetical situation are given in order to illustrate this. Firm A identifies an opportunity that requires heavy investment in one year, in order to fund that they decide to lower the contribution to their DB pension plan for one year, and compensating for that over the next 10 year. In this case the contribution would be greatly affected in one year, and only marginally in the next ten years. In another situation Firm B is having negative profits over five years, which results in lower contributions to the DB pension plan over those years. Over those years the coverage of the pension plan has slowly decreased, as not enough was contributed by the firm. The years after that see large profits because of an R&D breakthrough. The firm uses the profits to heavily increase their contributions for the next three years, in order to restore the coverage level. In this situation the effect on contributions is significant but not large in the first five years, and is then large during the years of prosperity. Investigating these possibilities, what actually occurs in practice, and using that in a form of lagged model, is considered beyond the scope of this study.
b. Variables Dependent variable
: In order to measure firm investment, it is important to take into account the investment relative to the firm itself. Therefore, a ratio is used, where the amount of firm investment is divided by the total value of the firm‟s assets. In order to calculate the firm investment the annual asset growth has been taken, and the depreciation and amortisation has been added9.
It is possible, however, to make a distinction between taking into account short term assets or only examining the long term assets (Asker, Farre-Mensa, & Ljungqvist, 2011). The reason for such a differentiation would be to disregard short term assets, and short term investment because they would not interact with the other variables. This was also considered by this
9 Which is similar to (Badertscher, Shroff, & White, 2013)
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study, contemplating whether or not the hypotheses tested only regard long term situations.
This however has been deemed to not be the case. While over all aspects such as coverage and maturity change over longer periods of time, contributions could change on a shorter time scale. A few years of loss for a firm may mean underfunding the pension plan for a few years. This illustrates that both short and long term assets and investments can be affected, therefore this study has decided to regard the totality of assets, and to not differentiate based on whether something is short, medium or long term.
Independent variables
Subsequently an explanation of the different independent variables, and how they are calculated, can be found. It is important to note that when a firm has multiple pension plans, which is not uncommon, an average of these pension plans will be made in order to calculate the independent variables. These averages will be based upon the amount of contribution each pension plan receives from that specific sponsoring firm, this will be elaborated upon in the next section, regarding the use of the data.
: For the coverage the ratio is simply the total amount of assets divided by the total amount of liabilities. There exist multiple ways of measuring pension fund coverage. The two main ones are the nominal and the real coverage. Since the real coverage takes into account more aspects of the pension fund situation (such as indexation) it has been deemed more representative for this study and therefore used. The nominal coverage will also be gathered and will be used for robustness tests. The way this is calculated is in accordance with the guidelines and regulation from De Nederlandse Bank (DNB), which is the supervisory institution regarding pension funds in the Netherlands.
: Taking into account the contribution of sponsoring firms is done by using a contribution ratio. This is achieved by dividing the total amount of contributions by the total amount of assets, similar to Rauh (2009).
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: In order to assess the maturity of the pension fund the number of beneficiaries is divided by the total number of participants. Beneficiary is defined as any participants of a pension fund receiving a benefit from that specific pension fund. This method of defining maturity base on the percentage of retired participants is similar to Andonov, Bauer &
Cremers (2017).
Control variables
The control variables regard the determinants of firm investment and size. For the determinants of firm investment three variables are used: one for opportunity (OP), one for internal financing (IF) and one for external financing (EF). Such a differentiation is also done by Richardson (2006), and Deng, Jiang, Li and Liao (2017). These were chosen based upon how firm investment works, and how control variables are used in other studies that examine firm investment (Richardson, 2006), (Liao, Lin, & Lin, 2016), (Deng, Jiang, Li, & Liao, 2017), (Vithessonthi, 2017). Each of these controls will be elaborated upon subsequently.
Opportunity: In order to control for the opportunity two possible variables can be used.
Some prior studies have used book to market ratio (Richardson, 2006), other studies have used sales growth (Liao, Lin, & Lin, 2016) or both (Vithessonthi, 2017). The book to market ratio is used in a similar manner to the way it is used by Cleary (1999). The book-to-market ratio is obtained by dividing the book value of the firm (which is assets-liabilities) by the market value (Price x Number of shares outstanding). The sales growth is also used to control for opportunity (Badertscher, Shroff, & White, 2013), but as an alternative to the book to market ratio. This is done by calculating the percentage of growth the sales have occurred, in the same manner as Liao, Lin & Lin (2016). Ideally both measures will be used alternating in order to investigate the robustness of the model.
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Internal financing: Taking into account the firm‟s internal financing possibilities, return on assets (ROA) is used. ROA is an indicator of the amount of returns a firm generates compared to its total amount of assets. It is calculated by dividing the earnings before interest and taxes (EBIT) by the total amount of assets. This is done similarly to Liao, Lin & Lin (2016), and to Deng, Jiang, Li & Liao (2017).
External financing: Leverage, this is the leverage of the sponsoring firm, which is used to control for the use and access to external financing (Richardson, 2006). Consulted literature does not have a consensus on whether to use total debt (Deng, Jiang, Li, & Liao, 2017), (Vithessonthi, 2017) or only long term debt (Liao, Lin, & Lin, 2016). The reasoning behind this distinction revolves around the short or long term possible effects of the investigated variables. If such variable would have no impact on short term debt, this type of debt could not represent a possible form of external financing. Which would lead to the exclusion of short term debt. In the case of this study, such certainty does not exist, meaning that total debt will be used. Leverage is calculated by dividing the total debt by the total assets of the firm.
SIZE: The size control variable represents the size of the sponsoring firm by using its total assets. In order to take into account, the vast differences within the sizes of various firms a natural logarithm will be used.
c. Hypotheses testing
Broadly speaking there are two ways utilised in order to assess whether or not the hypotheses will be adopted or rejected. The first regards the first three hypotheses, while the second focuses on the fourth hypothesis. In each of these, the “null hypothesis” is defined as being the situation where the hypothesis is not supported by the data. In order to test the first three hypotheses, the linear model will be used.
For each hypothesis investigated in this study, the null hypothesis is that there is no significant relationship. This will be done by examining the values and, more importantly, the
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significance of β1, β2, and β3 (which are the coefficients relating to the three first hypotheses).
If a significant relationship is discovered, then the null hypothesis is rejected and the hypothesised relationship is supported. If no significant relationship is found, then the hypothesised relationships are not supported. The significance used in order to determine that is α≤0.05. Investigating the effect of the pension plan types would be done by splitting the data into three separate data sets. Each representing one of the pension plan types, namely DB, hybrid, or DC. Comparing the relationships between these data sets would give an idea whether or not the pension plan type has any effect.
d. Endogeneity
There is a case to be made for the possibility of endogeneity regarding the linear model used.
An example of this could be with a firm that has an attractive investment opportunity, and in order to fund it, it would lower its contributions to their DB pension fund. This with the idea that the coverage ratio of the pension fund is very high. This would mean that the opportunity leads to higher firm investment, and a lower contribution for a few years, which would in turn lead to a lowering of the coverage of the pension fund.
In order to investigate such endogeneity it could be necessary to work with lagged effect. In order to do that a specific amount of lag needs to be determined and investigated. Taking the example given above, it would be complicated to select an amount of years for such a lag.
Determining the amount of lag would depend upon a multitude of factors, some of which directly related to the specific investment opportunity. Next to that, research consulted for this study10, which relates to investigating firm investment, has not used any such types of lagged effects. Investigating these possibilities, and whether or not they occur in significant frequencies falls outside of the scope of this study. Therefore all concerns of endogeneity will be disregarded in data processing.
10 Such as (Richardson, 2006) (Liao, Lin, & Lin, 2016) (Deng, Jiang, Li, & Liao, 2017) (Vithessonthi, 2017)
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V. Data
Two types of data will be required for this study. Firstly, data concerning the firms themselves and their capital expenditure. The dataset used concerns firms that are listed at the Amsterdam Exchange (AEX). The data required for this will be extracted from the ORBIS database11 and for the fiscal years 2014 through 2016. These years are chosen because they are deemed to constitute a stretch of time long enough to be representative for the firms, and are the most recent, when taking into account the limited accessibility of more recent data which would significantly hinder data collection.
In order to measure the performance of the pension funds, data regarding these funds is necessary. In the Netherlands, pension funds are required to publish annual reports. These reports should contain the information required for this study. The Dutch pension federation is an overlapping organisation that furthers the interests of Dutch pension funds (Pensioen Federatie). The overview the pension federation provides insight and facilitates data retrieval and comprehension. Any additional data needed will be recovered from the annual reports of the pension funds themselves.
Regarding the coverage data, it is important to note that there are two available measures of coverage of a pension fund, namely the real coverage and the nominal coverage rates. The difference lies in whether or not the coverage ratio includes indexation. The real coverage ration takes into account expected changes in prices and inflation. This is assumed to be a more precise representation of the health of the pension fund and its risk. Therefore, the real coverage will be used in determining pension fund health.
Firms and/or, pension funds where the necessary data is not available will be excluded from this study. Financial firms are also excluded.
Multiple pension funds: weighted average
When a firm uses multiple pension funds, each pension fund variable for that firm has been made using the percentages of the participation of the firm. In other words, the different contributions to different pension plans have been placed in perspective to the total amount of contribution. This is chosen because it is deemed to represent the financial burden that each pension fund poses for the sponsoring firm. Other methods have been evaluated, such as the percentage of active and/or passive participants, but they have all been considered to
11 For more information regarding, consult the database itself (Bureau van Dijk).
