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An Event Study Analysis of Statement of Financial Accounting Standards No. 158

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  • Abraham N. Fried

Abstract

This study examines the economic consequences of the Statement of Financial Accounting Standards (SFAS) No. 158 requirement to recognize previously disclosed net pension and postretirement benefit obligations on the balance sheet. The study documents a negative stock price reaction around the release of the SFAS No. 158 Exposure Draft. Additionally, the results indicate that the market reaction varies cross-sectionally with the magnitude of the balance sheet adjustment required by SFAS No. 158 and is driven by the other postretirement plan adjustment rather than the pension plan adjustment. The findings have important implications for the recognition versus disclosure debate because they document a significant market reaction to the relocation of already disclosed information from the financial statements footnotes to the balance sheet.

Suggested Citation

  • Abraham N. Fried, 2013. "An Event Study Analysis of Statement of Financial Accounting Standards No. 158," Accounting and Finance Research, Sciedu Press, vol. 2(2), pages 1-45, May.
    • Handle: RePEc:jfr:afr111:v:2:y:2013:i:2:p:45
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    References listed on IDEAS

    as
    1. Paquita Y. Davis†Friday & Chao†Shin Liu & H. Fred Mittelstaedt, 2004. "Recognition and Disclosure Reliability: Evidence from SFAS No. 106," Contemporary Accounting Research, John Wiley & Sons, vol. 21(2), pages 399-429, June.
    2. Jeremy Gold, 2005. "Accounting/Actuarial Bias Enables Equity Investment By Defined Benefit Pension Plans," North American Actuarial Journal, Taylor & Francis Journals, vol. 9(3), pages 1-21.
    3. 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.
    4. Aboody, D, 1996. "Recognition versus disclosure in the oil and gas industry," Journal of Accounting Research, Wiley Blackwell, vol. 34, pages 21-32.
    5. Dowdell, Thomas D. & Klamm, Bonnie K. & Spindle, Roxanne M., 2010. "Predicting cash flows related to defined benefit plan contributions," Journal of Pension Economics and Finance, Cambridge University Press, vol. 9(4), pages 505-532, October.
    6. Martin Feldstein & Randall Morck, 1983. "Pension Funding Decisions, Interest Rate Assumptions, and Share Prices," NBER Chapters, in: Financial Aspects of the United States Pension System, pages 177-210, National Bureau of Economic Research, Inc.
    7. Fried, Abraham N., 2012. "Disclosure versus recognition: Evidence from lobbying behavior in response to SFAS No. 158," Research in Accounting Regulation, Elsevier, vol. 24(1), pages 25-32.
    8. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 1992. "The market valuation implications of net periodic pension cost components," Journal of Accounting and Economics, Elsevier, vol. 15(1), pages 27-62, March.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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