Are potential effects of SFAS 158 associated with firms' decisions to freeze their defined benefit pension plans?

Review of Accounting and Finance - Tập 9 Số 4 - Trang 424-451 - 2010
CathyBeaudoin1, NandiniChandar2, Edward M.Werner3
1School of Business Administration, University of Vermont, Burlington, Vermont, USA
2College of Business Administration, Rider University, Lawrenceville, New Jersey, USA, and
3LeBow College of Business, Drexel University, Philadelphia, Pennsylvania, USA

Tóm tắt

PurposeThe purpose of this paper is to examine whether the significant clustering of defined benefit (DB) pension plan freeze announcements during 2001‐2006 is motivated at least in part by accounting concerns due to the Financial Accounting Standards Board's pending adoption of Statement of Financial Accounting Standards No. 158 (SFAS 158).Design/methodology/approachUsing logistic regression models, the paper compares 147 “freeze firms” with a matched sample of firms that did not announce a DB plan freeze. Empirical models control for other DB plan motives including as a response to stricter contribution requirements under the Pension Protection Act of 2006 and improving the firm's competitive position.FindingsThe potential SFAS 158 impact is significantly associated with firms' decisions to freeze their DB plans. Firm profitability is also significantly associated with the freeze decision. However, there is no significant association between cash flow positions or pension plan contributions and the freeze decision.Research limitations/implicationsIt is possible that economic conditions adversely affecting the funded status of DB plans also motivate the freeze decision. While this study controls for the economic environment, economic factors could exacerbate the potential effect of SFAS 158.Originality/valueThis paper considers potential effects of accounting policy by examining its influence on real management actions and has consequences for a variety of stakeholders including investors, creditors, and, importantly, pension beneficiaries and workers, as DB plans represent implicit contracts between firms and their employees.

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Review of Accounting and Finance

Tập 9 Số 4

424-451

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