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We study the potential effects of pension underfunding on corporate investment, financial constraints and improved employee bonding using 10 Pacific-Basin countries (including the United States, Australia, and eight Asian countries) at heterogeneous economic development stages and different regulatory environments. We document that corporate pensions are significantly underfunded in most countries of our sample in the period of 2001–2017, when interest rates were ultralow in most countries. In addition, firms from countries with stronger employee protection and more generous retirement benefits tend to show higher levels of underfunding in their defined benefit (DB) pension plans. To the extent of pension underfunding imposing constraints on corporate investment, we find that firms in these countries can face more constraints on investment when their pension is underfunded.

We examine and compare funding status, actuarial assumptions and asset investment allocations of defined benefit pension plans in the public and private sectors across time, using information as reported under GASB and FASB. We find that pension plans in both sectors are underfunded and that inferences about pension funding in the public sector would be different if pension assets' fair values were required in the computation of funding status. Actuarial assumptions of public employee plans appear to be both more optimistic and less variable than those of private sector plans. Finally, we document that public sector plans allocate invested assets somewhat differently than in the private sector, although our findings do not confirm anecdotal reports of riskier pension investment strategies relative to the private sector.

This study theoretically investigates the impacts of tax benefits on funding level and risk-taking of a corporate defined benefit (DB) pension plan.

The present value of the future tax benefits is maximized while the stockholders determine the funding level and investment risk-taking in DB plans. As a feature of DB plans, this study considers pension benefits to be pre-determined. Further, the pension beneficiary has a priority over the sponsor company's creditors for the pension reserve fund. These are seldom considered in previous studies.

It is desirable to decrease the funding level of DB plans to increase tax benefits. This is because the effect of tax exemption for the pension fund's investment income is eliminated by the change in the contribution arising from the investment's result. The optimal investment risk-taking depends on the funding level.

The impact of tax benefits on decision-making for DB plans is significantly different from that stated by previous studies, that is, an increase in pension funds will reduce the corporate debt. To explain corporate behavior, this study's results—derived from the essential feature of DB plans, which could not have been included in previous studies—should be considered.

The purpose of this paper is to examine whether the significant clustering of defined benefit (DB) pension plan freeze announcements during 2001‐2006 is motivated at least in part by accounting concerns due to the Financial Accounting Standards Board's pending adoption of Statement of Financial Accounting Standards No. 158 (SFAS 158).

Using logistic regression models, the paper compares 147 “freeze firms” with a matched sample of firms that did not announce a DB plan freeze. Empirical models control for other DB plan motives including as a response to stricter contribution requirements under the Pension Protection Act of 2006 and improving the firm's competitive position.

The potential SFAS 158 impact is significantly associated with firms' decisions to freeze their DB plans. Firm profitability is also significantly associated with the freeze decision. However, there is no significant association between cash flow positions or pension plan contributions and the freeze decision.

It is possible that economic conditions adversely affecting the funded status of DB plans also motivate the freeze decision. While this study controls for the economic environment, economic factors could exacerbate the potential effect of SFAS 158.

This paper considers potential effects of accounting policy by examining its influence on real management actions and has consequences for a variety of stakeholders including investors, creditors, and, importantly, pension beneficiaries and workers, as DB plans represent implicit contracts between firms and their employees.

The purpose of this paper is to theoretically examine the risk-taking decision of corporate defined benefits (DB) plans. The equity holders’ investment problem that is represented by the position of a vulnerable option is solved.

The simple traditional contingent claim approach is applied, which considers only the distributions of corporate cash flow, without the model expansions, such as market imperfections, needed to explain the firms’ behavior for DB plans in previous studies.

The authors find that the optimal solution to the equity holders’ DB investment problem is not an extreme corner solution such as 100 percent investment in equity funds as in the literature. Rather, the solution lies in the middle range, as is commonly observed in real-world economies.

The major value of this study is that it develops a clear mechanism for obtaining an internal solution for the equity holders’ DB investment problem and it provides the understanding that the base for corporate investment behavior for DB plans should incorporate the fact that in some cases the optimal solution is in the middle range. Therefore, the corporate risk-taking behavior of DB plans is harder to identify than the results of the empirical literature have predicted.

This paper examines the formation of pension plans from a corporate finance perspective. The theoretical underpinnings for selecting a defined‐benefit or defined‐contribution plan are discussed and used to form empirically testable hypotheses. Linear probability and logit models are used to identify corporate financial characteristics that affect the likelihood of forming a defined‐benefit or defined‐contribution plan. The results strongly indicate that firms with high degrees of debt and intangible assets are least likely to form defined‐benefit plans in a post‐reversion situation, while firm size enhances the probability of forming defined‐benefit plans. The growth in private retirement plans over the past quarter century has made pension fund management a critical concern for many financial managers. The total amount of assets in private pension plans amounted to approximately $150 billion in 1970, while this figure was about $2 trillion in 1989. A corresponding trend to this growth has been an acceleration in the formation of defined‐contribution plans relative to defined‐benefit plans. In 1975 about 29 percent of all plans were defined‐contribution plans, and 71 percent were defined‐benefit plans. In contrast, defined‐contribution plans comprised 55 percent of all plans in 1988, while 45 percent were defined‐benefit plans.1 Gustman and Steinmeier (1987) suggest that the shift to defined‐contribution plans in recent years may be attributable to shifts in jobs in the economy away from the manufacturing sector and toward the service sector. Furthermore, the role of unions, firm size, and administrative costs have also been sighted as factors which partially explain the economy wide shift toward defined‐contribution plans (see Gustman and Steinmeier (1989), Clark and McDermed (1990), and Kruse (1991)). In this paper, we address the pension choice by examining the formation of individual plans from a corporate finance perspective. Specifically, we examine the pension choice issue when firms are faced with making this decision after the termination of an overfunded defined‐benefit plan. The remainder of this paper is organized as follows. Section I discusses the possible motives for selecting one plan over the other, and develops testable hypotheses. The data and methodology are discussed in section II, while section III presents the empirical results. Section IV summarizes and concludes the paper.

The purpose of this paper is to use the theoretical and empirical pension literatures to question whether employers are likely to gain any competitive advantage from degrading or eliminating their employees’ defined benefit (DB) pensions.

Critical literature review, bringing together and synthesizing the industrial relations, economics, social policy, and applied pensions literature.

DB pension plans do deliver a number of potential performance benefits, most notably a decrease in turnover and establishment of longer-term employment relationships. However, benefits are more pronounced in some conditions than others, which are identified.

Most of the analysis of pension effects to date focuses primarily on DB plans. Yet, these are declining in significance. In the years ahead, more attention needs to be paid to the potential consequences of defined contribution plans and other types of pension.

In re-evaluating DB pensions, firms have tended to focus on savings made through cost cutting. Yet, this approach tends to view a firm's people as an expense rather a potential asset. Attempts to abandon, modify, or otherwise reduce such schemes has the potential to save money in the short term, but the negative long-term consequences may be considerable, even if they are not yet obvious.

This paper is topical in that it consolidates existing research evidence from a number of different bodies of literature to make a case for the retention of DB pension plans, when, in many contexts, they are being scaled back or discarded. It raises a number of important issues for reflection by practitioners, and highlights key agendas for future scholarly research.

The purpose of this paper is to assess the extent to which pension accounting represents an enabling or emancipatory accounting.

Many countries are facing a so‐called “pensions crisis” which is reflected in and arguably, to some extent at least, is precipitated by accounting. Occupational pensions in the UK are focused upon and their role in the pension crisis discussed. The enabling or emancipatory potential of the internet for accounting for occupational pension schemes is explored. The contents of the web sites of the 100 largest companies listed on the London Stock Exchange (FTSE 100) are examined in terms of the elements of an enabling accounting, as set out by Gallhofer and Haslam in 1997. Alternative forms of accounting for pensions, including accounts by trade unions and others, are also examined.

The full possibilities of the internet have not yet been mobilised in respect of accounting for occupational pension schemes and companies' actions appear to be driven by the hegemony of the market rather than a concern for the social wellbeing of pensioners. A number of inequalities are evident.

The majority of UK employees have no occupational pension. The paper therefore only addresses one aspect of the pension crisis.

Suggests how corporate web sites could be improved through the provision of dedicated pensions sections and increased pensions' disclosures. Argues that alternative accounts provided by trade unions, organisations associated with the elderly and others are required to provide counter accounts. Calls for more education about the importance of saving from an early age.

Applies elements of an enabling accounting to a specific accounting problem, accounting for pensions.

The funding of defined-benefit plans has garnered the attention of academicians, practitioners, and policymakers. Drawing upon agency and organizational control theories, this study investigates the implications of board independence on changes in defined-benefit funding. Using a panel dataset of S&P 500 companies sponsoring defined-benefit plans, the author finds that corporate boards matter. Specifically, CEO duality and outside director representation are associated with year-to-year decreases in defined-benefit funding. Conversely, outside director ownership is related to year-to-year increases in defined-benefit funding. Furthermore, outside director ownership moderated the relationship between outside director representation and defined-benefit funding such that outside director representation is associated with year-to-year increases in defined-benefit plan funding when the percentage of outside director ownership is high.