Voluntary Pension Funding in Germany and the Effect of International Accounting

Abstract

This paper empirically analyzes voluntary pension funding. Using data of German company pension plans from 1998 to 2006, it documents that traditionally unfunded plans have been increasingly replaced, especially by funding Contractual Trust Arrangements (CTAs). International influences such as pension funding abroad are a major determinant of this shift in corporate financial policy but financial factors such as profitability are not found to have an important effect. We also investigate the consequences of applying IAS/IFRS or US GAAP instead of German GAAP and find evidence that supports the hypothesis that international accounting has a positive effect on voluntary pension funding in Germany.

Keywords: pension funding, pension accounting, international accounting, Germany

JEL Classification: G23, G32, M41