Determinants of Actuarial Valuation Method Changes for Pension Funding and Reporting: Evidence from the UK
Posted: 17 Jul 2000
Date Written: Undated
This study examines various factors that potentially explain cross-sectional variations in UK firms' managerial discretion to switch towards a market-based actuarial pension valuation method for pension funding and reporting purposes. Evidence is based on accounting, actuarial and stock market data for an industry-matched pair sample of 62 UK firms. We find a significant relationship between the switching decision and the sponsoring firms' flow funding of the pension plan, as well as pension earnings in the pre-switch valuation year. These findings imply that UK firms' switching decisions are potentially explained by characteristics of the pension funds they sponsor, and contradict the findings of earlier U.S. based studies, which imply that these choices can be explained from a corporate financial perspective.
Keywords: Actuarial valuation method; Pension funding
JEL Classification: M41, J32, J53
Suggested Citation: Suggested Citation