How Does the Market Value Unfunded Pension Liabilities?
AbstractWe lead off by discussing a number of theoretical reasons for expecting various relationships between a firm's unfunded pension liability and its market value. We then discuss our doubts about the methodology of earlier papers which studied the empirical relation between funding and market value using standard cross sectional techniques. A modified cross sectional approach which alleviates some of these doubts, and a variable effect event study methodology which alleviates most of them are both employed to investigate the issues raised in the first part of the paper. Our conclusion confirms those of earlier studies that unfunded pension liabilities are accurately reflected in lower share prices.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1602.
Date of creation: Apr 1985
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Publication status: published as Bulow, Jeremy, Randall Morck and Lawrence H. Summers. "How does the Market Value Unfunded Pension Liabilities?" Issues in Pension Eocnomics, edited by Z. Bodie, J. Shoven and D. Wise, Chicago: UCP, 1987.
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- 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.
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