Unfunded pension liabilities and stock returns
AbstractThis paper investigates whether the market rationally anticipates the value implications of unrecognized pension obligations, using a large sample of Japanese firms where pension obligations are substantially underfunded. If a firm's unrecognized pension obligation is not incorporated into its share price, its stock returns will be lower than those of other firms, because its deficit will affect the firm's income statement in the coming years. We find that firms with large unrecognized obligations earn lower risk-adjusted returns. This evidence suggests that the market does not efficiently incorporate information in the pension items.
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Bibliographic InfoArticle provided by Elsevier in its journal Pacific-Basin Finance Journal.
Volume (Year): 18 (2010)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/pacfin
Market efficiency Unfunded pension obligations;
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