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Pension accruals and share prices: evidence from the amortization costs of transition amounts

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  • Takafumi Sasaki

Abstract

This article investigates whether the market rationally evaluates the economic value of pension plans by focusing on the impacts of amortization costs of transition amounts on share prices. Because the amortization costs of transition amounts are cost attributed to the old deficits that appeared in the adoption year, they do not contain new additional information unless managers deliver private information through accountings choices. The data-set is from Japanese firms after the adoption of the postretirement accounting standard wherein recognition costs of transition amounts had a huge impact on the bottom-line earnings of sponsoring firms. We find that investors evaluate the amortization costs of transition amounts as though they hold new, value-relevant information. On the other hand, we do not have clear evidence that managers deliver private information through accounting discretions on the amortization of transition amounts.

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  • Takafumi Sasaki, 2017. "Pension accruals and share prices: evidence from the amortization costs of transition amounts," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(1-2), pages 216-231, April.
    • Handle: RePEc:taf:raaexx:v:24:y:2017:i:1-2:p:216-231
    DOI: 10.1080/16081625.2016.1170617
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    1. 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.
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