Do Managers of US Defined Benefit Pension Plan Sponsors Use Regulatory Freedom Strategically?

• 成果类型: Article
• 署名作者: Kisser, Michael; Kiff, John; Soto, Mauricio
• 署名单位: Norwegian School of Economics (NHH); International Monetary Fund
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12182
• 发表日期: 2017
• 页码: 1213-1255
• 关键词: asset allocation; RISK; INVESTMENT; prices; POLICY; determinants; constraints; decisions; earnings; reflect

摘要

We use historical particularities of pension funding law to investigate whether managers of U.S. corporate defined benefit pension plan sponsors strategically use regulatory freedom to lower the reported value of pension liabilities, and hence required cash contributions. For some years, pension plans were required to estimate two liabilities-one with mandated discount rates and mortality assumptions, and another where these could be chosen freely. Using a sample of 11,963 plans, we find that the regulated liability exceeds the unregulated measure by 10% and the difference further increases for underfunded pension plans. Underfunded plans tend to assume substantially higher discount rates and lower life expectancy. The effect persists both in the cross-section of plans and over time and it serves to reduce cash contributions. We further show that plan sponsor managers use the freed-up cash for corporate investment and that credit risk is unlikely to explain the finding.