How Does the Market Value Unfunded Pension Liabilities?
In: Issues in Pension Economics
We 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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This chapter was published in: | This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number
6854. | Handle: | RePEc:nbr:nberch:6854 | Contact details of provider: | Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. | Phone: 617-868-3900 Web page: http://www.nber.org Email: More information through EDIRC
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Jeremy I. Bulow & Randall Morck & Lawrence H. Summers, 1985. "How Does the Market Value Unfunded Pension Liabilities?," NBER Working Papers 1602, National Bureau of Economic Research, Inc.
- French, Kenneth R & Ruback, Richard S & Schwert, G William, 1983. "Effects of Nominal Contracting on Stock Returns," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 70-96, February.
- Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
- Sharpe, William F., 1976. "Corporate pension funding policy," Journal of Financial Economics, Elsevier, vol. 3(3), pages 183-193, June.
- Feldstein, Martin & Seligman, Stephanie, 1981. "Pension Funding, Share Prices, and National Savings," Journal of Finance, American Finance Association, vol. 36(4), pages 801-824, September.
- Martin Feldstein & Stephanie Seligman, 1980. "Pension Funding, Share Prices, and National Saving," NBER Working Papers 0509, National Bureau of Economic Research, Inc.
- Mark Gersovitz, 1980. "Economic Consequences of Unfunded Vested Pension Benefits," NBER Working Papers 0480, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
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