Title

The Information Content of Corporate Pension Funding Status in Japan

Document Type

Article

Date of Original Version

7-1-2016

Abstract

This paper tests if a firm's pension funding ratio (pension assets/PBO) reveals the management's private information about the firm's operation when the firm can exercise discretion in pension funding. The lax enforcement of pension funding rules and the prevalence of management forecasts make Japanese firms an ideal testing ground. We show that, among firms with large business uncertainty, large accruals, or high effective tax rates, the pension funding ratio predicts the firm's management forecast errors significantly beyond conventional control variable and the effects of pension accounting management. However, the stock market does not appear to incorporate this information immediately.

Publication Title

Journal of Business Finance and Accounting

Volume

43

Issue

7-8

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