The Information Content of Corporate Pension Funding Status in Japan

47 Pages Posted: 30 Sep 2016

See all articles by Shingo Goto

Shingo Goto

University of Rhode Island - College of Business Administration

Noriyoshi Yanase

Keio University - Faculty of Business and Commerce

Date Written: July/August 2016

Abstract

This paper tests if a firm's pension funding ratio (pension assets/PBO) reveals the management's private information about the firm's operation when the firm can exercise discretion in pension funding. The lax enforcement of pension funding rules and the prevalence of management forecasts make Japanese firms an ideal testing ground. We show that, among firms with large business uncertainty, large accruals, or high effective tax rates, the pension funding ratio predicts the firm's management forecast errors significantly beyond conventional control variable and the effects of pension accounting management. However, the stock market does not appear to incorporate this information immediately.

Keywords: corporate pensions, pension funding, management forecasts, market efficiency, cross‐sectional predictability, japanese stock market, pension accounting management, measurement errors

Suggested Citation

Goto, Shingo and Yanase, Noriyoshi, The Information Content of Corporate Pension Funding Status in Japan (July/August 2016). Journal of Business Finance & Accounting, Vol. 43, Issue 7-8, pp. 903-949, 2016, Available at SSRN: https://ssrn.com/abstract=2845596 or http://dx.doi.org/10.1111/jbfa.12197

Shingo Goto (Contact Author)

University of Rhode Island - College of Business Administration ( email )

Kingston, RI 02881
United States
4018744318 (Phone)
4018744312 (Fax)

Noriyoshi Yanase

Keio University - Faculty of Business and Commerce ( email )

2-15-45 Mita
Minato-ku
Tokyo 108-8345
Japan
1088345 (Fax)

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