IDEAS home Printed from https://ideas.repec.org/a/bla/jfinan/v40y1985i3p927-40.html
   My bibliography  Save this article

The Usefulness of the Wind-Up Measure of Pension Liabilities: A Labor Market Perspective

Author

Listed:
  • Pesando, James E

Abstract

Financial economists have long favoured the use of a wind-up measure of the firm's pension liabilities. Yet the pension liabilities of the firm also represent the pension wealth of its workers. It is reasonable to presume that workers and shareholders have a common view of the pension contract. If the wind-up measure depicts the true pension liabilities of the firm, then the wage concession granted by its workers must reflect the fact that the firm may choose to terminate the plan at any time. Data on the wage-service characteristics of the membership of a sample of final earnings plans in Canada suggest,contrary to the implications of the wind-up measure, that workers' wages do not internalize accruing pension benefits on a year-to-year basis. Instead, the data suggest that pension plans may be a vehicle through which a significant portion of the total compensation of individual employees is deferred until their later work years, and that the wind-up measure may well understate the pension liabilities of an on-going firm.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Pesando, James E, 1985. "The Usefulness of the Wind-Up Measure of Pension Liabilities: A Labor Market Perspective," Journal of Finance, American Finance Association, vol. 40(3), pages 927-940, July.
    • Handle: RePEc:bla:jfinan:v:40:y:1985:i:3:p:927-40
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0022-1082%28198507%2940%3A3%3C927%3ATUOTWM%3E2.0.CO%3B2-%23&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zvi Bodie & John B. Shoven, 1983. "Financial Aspects of the United States Pension System," NBER Books, National Bureau of Economic Research, Inc, number bodi83-1.
    2. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987. "How Does the Market Value Unfunded Pension Liabilities?," NBER Chapters, in: Issues in Pension Economics, pages 81-110, National Bureau of Economic Research, Inc.
    3. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    4. Jeremy I. Bulow, 1982. "What are Corporate Pension Liabilities?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(3), pages 435-452.
    5. Pesando, James E, 1984. "Employee Evaluation of Pension Claims and the Impact of Indexing Initiatives," Economic Inquiry, Western Economic Association International, vol. 22(1), pages 1-17, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paul Klumpes & Mark Whittington & Yong Li, 2009. "Determinants of the Pension Curtailment Decisions of UK Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(7-8), pages 899-924.
    2. Thomas, Paula B. & Williams, Paul F., 2009. "Cash balance pension plans: A case of standard-setting inadequacy," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 20(2), pages 228-254.
    3. David McCarthy, 2003. "A Lifecycle Analysis of Defined Benefit Pension Plans," Working Papers wp053, University of Michigan, Michigan Retirement Research Center.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Steven G. Allen & Robert L. Clark, 1987. "Pensions and Firm Performance," NBER Working Papers 2266, National Bureau of Economic Research, Inc.
    2. Rauh, Joshua D. & Stefanescu, Irina & Zeldes, Stephen P., 2020. "Cost saving and the freezing of corporate pension plans," Journal of Public Economics, Elsevier, vol. 188(C).
    3. Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1987. "How Does the Market Value Unfunded Pension Liabilities?," NBER Chapters, in: Issues in Pension Economics, pages 81-110, National Bureau of Economic Research, Inc.
    4. Paul J. M. Klumpes & Kevin McMeeking, 2007. "Stock Market Sensitivity to U.K. Firms' Pension Discounting Assumptions," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 10(2), pages 221-246, September.
    5. Clark, Robert L. & McDermed, Ann A., 1988. "Do Employment Contracts Alter Earnings Profiles?," Department of Economics and Business - Archive 259435, North Carolina State University, Department of Economics.
    6. Joshua D. Rauh & Irina Stefanescu & Stephen P. Zeldes, 2020. "Cost Saving and the Freezing of Corporate Pension Plans," NBER Working Papers 27251, National Bureau of Economic Research, Inc.
    7. Olivia S. Mitchell, "undated". "Developments in Pensions," Pension Research Council Working Papers 98-4, Wharton School Pension Research Council, University of Pennsylvania.
    8. Jeffrey R. Brown, 2008. "Guaranteed Trouble: The Economic Effects of the Pension Benefit Guaranty Corporation," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 177-198, Winter.
    9. Coronado, Julia & Mitchell, Olivia S. & Sharpe, Steven A. & Blake Nesbitt, S., 2008. "Footnotes aren't enough: the impact of pension accounting on stock values," Journal of Pension Economics and Finance, Cambridge University Press, vol. 7(3), pages 257-276, November.
    10. Palacios, Robert, 2006. "Civil-service pension schemes around the world," MPRA Paper 14796, University Library of Munich, Germany.
    11. Pesando, James E, 1987. "Discontinuities in Pension Benefit Formulas and the Spot Model of the Labor Market: Implications for Financial Economists," Economic Inquiry, Western Economic Association International, vol. 25(2), pages 215-238, April.
    12. Jeremy I. Bulow & Myron S. Scholes, 1983. "Who Owns the Assets in a Defined-Benefit Pension Plan?," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 17-36, National Bureau of Economic Research, Inc.
    13. Paul Hek & Daniel Vuuren, 2011. "Are older workers overpaid? A literature review," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(4), pages 436-460, August.
    14. Brown, Jeffrey R. & Liang, Nellie & Weisbenner, Scott, 2006. "401(k) matching contributions in company stock: Costs and benefits for firms and workers," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1315-1346, August.
    15. Zvi Bodie & Jay O. Light & Randall Morck, 1987. "Funding and Asset Allocation in Corporate Pension Plans: An Empirical Investigation," NBER Chapters, in: Issues in Pension Economics, pages 15-48, National Bureau of Economic Research, Inc.
    16. Rebecca A. Luzadis & Olivia S. Mitchell, 1991. "Explaining Pension Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 26(4), pages 679-703.
    17. Alan L. Gustman & Thomas L. Steinmeier, 1988. "An Analysis Of Pension Benefit Formulas, Pension Wealth And Incentives From Pensions," NBER Working Papers 2535, National Bureau of Economic Research, Inc.
    18. Julia Lynn Coronado & Steven A. Sharpe, 2003. "Did Pension Plan Accounting Contribute to a Stock Market Bubble?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 323-371.
    19. David McCarthy, 2003. "A Lifecycle Analysis of Defined Benefit Pension Plans," Working Papers wp053, University of Michigan, Michigan Retirement Research Center.
    20. Alan L. Gustman & Thomas L. Steinmeier, 1989. "Evaluating Pension Policies in a Model with Endogeous Contributions," NBER Working Papers 3085, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:40:y:1985:i:3:p:927-40. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/afaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.