The Information Content of Corporate Pension Funding Status in Japan

Shingo Goto, Noriyoshi Yanase

Research output: Contribution to journalArticle

1 Citation (Scopus)

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.

Original languageEnglish
Pages (from-to)903-949
Number of pages47
JournalJournal of Business Finance and Accounting
Volume43
Issue number7-8
DOIs
Publication statusPublished - 2016 Jul 1
Externally publishedYes

Fingerprint

Pension funding
Information content
Japan
Management forecasts
Discretion
Assets
Forecast error
Effective tax rates
Testing
Pension accounting
Accruals
Stock market
Exercise
Control variable
Enforcement
Private information
Pensions
Uncertainty
Japanese firms

Keywords

  • corporate pensions
  • cross-sectional predictability
  • japanese stock market
  • management forecasts
  • market efficiency
  • measurement errors
  • pension accounting management
  • pension funding

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance

Cite this

The Information Content of Corporate Pension Funding Status in Japan. / Goto, Shingo; Yanase, Noriyoshi.

In: Journal of Business Finance and Accounting, Vol. 43, No. 7-8, 01.07.2016, p. 903-949.

Research output: Contribution to journalArticle

@article{79fd8565ff8949b59bd3739e8ce06602,
title = "The Information Content of Corporate Pension Funding Status in Japan",
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, cross-sectional predictability, japanese stock market, management forecasts, market efficiency, measurement errors, pension accounting management, pension funding",
author = "Shingo Goto and Noriyoshi Yanase",
year = "2016",
month = "7",
day = "1",
doi = "10.1111/jbfa.12197",
language = "English",
volume = "43",
pages = "903--949",
journal = "Journal of Business Finance and Accounting",
issn = "0306-686X",
publisher = "Wiley-Blackwell",
number = "7-8",

}

TY - JOUR

T1 - The Information Content of Corporate Pension Funding Status in Japan

AU - Goto, Shingo

AU - Yanase, Noriyoshi

PY - 2016/7/1

Y1 - 2016/7/1

N2 - 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.

AB - 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.

KW - corporate pensions

KW - cross-sectional predictability

KW - japanese stock market

KW - management forecasts

KW - market efficiency

KW - measurement errors

KW - pension accounting management

KW - pension funding

UR - http://www.scopus.com/inward/record.url?scp=84988916826&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84988916826&partnerID=8YFLogxK

U2 - 10.1111/jbfa.12197

DO - 10.1111/jbfa.12197

M3 - Article

VL - 43

SP - 903

EP - 949

JO - Journal of Business Finance and Accounting

JF - Journal of Business Finance and Accounting

SN - 0306-686X

IS - 7-8

ER -