Asymmetric Timeliness in Pension Asset Accounting

43 Pages Posted: 11 Sep 2008

See all articles by Richard M. Frankel

Richard M. Frankel

Washington University in Saint Louis - Olin Business School

Xiumin Martin

Washington University in Saint Louis - Olin School of Business

Ron Shalev

New York University (NYU) - Leonard N. Stern School of Business

Date Written: September 9, 2008

Abstract

We investigate whether revisions in the expected rate of return on pension plan assets are more sensitive to the difference between realized returns and expected returns when realized returns fall short of expectations than when they exceed expectations. We find that the correlation between expectation errors and revisions in the expected rate of return on plan assets is significantly more positive when realized returns in year t are below the expected rate of return in year t-1 than when realized returns are above the expected rate of return in year t-1. Further exploration indicates that this asymmetric-revision sensitivity is accentuated when firm leverage and the volatility of realized returns are high and when CEO stock ownership is low. These conditions are consistent with an increased demand for asymmetrically timely earnings.

JEL Classification: M41, M44, G23

Suggested Citation

Frankel, Richard M. and Martin, Xiumin and Shalev, Ron, Asymmetric Timeliness in Pension Asset Accounting (September 9, 2008). Available at SSRN: https://ssrn.com/abstract=1265670 or http://dx.doi.org/10.2139/ssrn.1265670

Richard M. Frankel

Washington University in Saint Louis - Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Xiumin Martin (Contact Author)

Washington University in Saint Louis - Olin School of Business ( email )

Saint Louis, MO 63130
United States

Ron Shalev

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States
2129980418 (Phone)

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