Footnotes aren't enough
Subtitle: the impact of pension accounting on stock values
By: Julia Coronado, Olivia S. Mitchell, Steven A. Sharpe, S. Blake Nesbitt.
Contributors: Mitchell, Olivia S.; Sharpe, Steven Alan.; Nesbitt , Blake S.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 13726; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13726.
Publisher: National Bureau of Economic Research
Published: 2008
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Some research has suggested that companies with defined benefit (DB) pensions are sometimes significantly misvalued by the market.  This is because the measures of pension cost and pension net liabilities embedded in financial statements, taken at face value, can provide very misleading picture of pension finances.  The more pertinent information on pension finances is relegated to footnotes, but might not receive much attention from portfolio managers.  But dramatic swings in the financial conditions of large DB plans around the turn of the decade focused widespread attention on pension accounting practices, and dissatisfaction with current accounting standards has recently prompted the Financial Accounting Standards Board (FASB) to take up a project revamp DB pension accounting.  Arguably, the increased attention should have made investors wise to the informational problems, thereby eliminating systematic mispricing in recent years.  We test this proposition and conclude that investors continued to misvalue DB pensions, inducing sizable valuation errors in the stock of many companies.  Our findings suggest that FASB's current reform efforts could substantially aid the market's ability to value firms with DB pensions"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/6/2008.

Includes bibliographical references.

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