43 Pages Posted: 28 May 2004
Date Written: April 1985
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.
Suggested Citation: Suggested Citation
Bulow, Jeremy and Morck, Randall and Summers, Lawrence H., How Does the Market Value Unfunded Pension Liabilities? (April 1985). NBER Working Paper No. w1602. Available at SSRN: https://ssrn.com/abstract=227199