"Firms' Choice of Pension Discount Rate and Stock Prices"(in Japanese)

Under present financial accounting standards, in Japan and in U. S, the firms can choose the pension discount rate, that is used only for earnings measurement, at their discretion. This paper investigates, first, what factors affect the choice of the pension discount rate. The sample firms in this paper lowered their discount rates, when market interest rate declined in 1990's, more slowly than the trend of the markets. The causes of this delay are analyzed by Logit model. Regression results show that, given declining interest rate, the significant factor affecting the firms' choice is not leverage, but profitability (return-to-equity: ROE). Second, this research investigates empirically how stock price reflects the pension discount rate chosen by the firm. Both the unamortized pension obligations and the periodic pension costs of the firm are positively associated with its stock price. However, the coefficients of the firms, whose discount rates are higher than median, are smaller significantly than that of the firms choosing lower rates. Those coefficients are not significantly different from zero. This asymmetry result is consistent with the first point in this paper, concerning the firm's motives of choosing the pension discount rate.