Uniformity versus flexibility: Evidence from pricing of the pension obligation

Accounting Review

Volumn 82, Issue 1, 2007, Pages 107-137

  Hann, Rebecca N ^a   Lu, Yvonne Y ^a   Subramanyam, K R ^a  

^a UNIVERSITY OF SOUTHERN CALIFORNIA   (United States)

Author keywords

Discretion; Earnings management; Flexibility; Information communication; Managerial opportunism; Pensions; Uniformity; Value relevance

Indexed keywords

EID: 33847695679     PISSN: 00014826     EISSN: None     Source Type: Journal    
DOI: 10.2308/accr.2007.82.1.107     Document Type: Article

References (51)

1. Aboody, D., J. Hughes, and J. Liu. 2002. Measuring value relevance in a (possibly) inefficient market. Journal of Accounting Research 40 (4): 965-986.
2. Asthana, S. 1999. Determinants of funding strategies and actuarial choices for defined-benefit pension plans. Contemporary Accounting Research 16 (1): 39-74.
3. Barth, M. E. 1991. Relative measurement errors among alternative pension asset and liability measures. The Accounting Review 66 (3): 433-463.
4. _, W. H. Beaver, and W. R. Landsman. 1992. The market valuation implications of net periodic pension cost components. Journal of Accounting and Economics 15 (1): 27-62.
5. Bartov, E., P. Mohanram, and D. Nissim. 2004. Stock option expense, forward-looking information, and implied volatilities of traded options. Working paper, New York University and Columbia University.
6. Beaver, W. H., and E. E. Engel. 1996. Discretionary behavior with respect to allowance for loan losses and the behavior of security prices. Journal of Accounting and Economics 22 (1-3): 177-206.
7. _, and M. F. McNichols. 1998. The characteristics and valuation of loss reserves of property casualty insurers. Review of Accounting Studies 3 (1-2): 73-95.
8. _, and _. 2001. Do stock prices of property casualty insurers fully reflect information about earnings, accruals, cash flows, and development? Review of Accounting Studies 6 (2-3): 197-220.
9. _, and M. Venkatachalam. 2003. Differential pricing of components of bank loan fair values. Journal of Accounting, Auditing and Finance 18 (1): 41-66.
10. Belsley, D. A., E. Kuh, and R. E. Welsch. 1980. Regression Diagnostics: Identifying Influential Data and Sources of Collinearity. New York, NY: Wiley.
11. Bernard, V. L., and D. J. Skinner. 1996. What motivates managers' choice of discretionary accruals? Journal of Accounting and Economics 22 (1-3): 313-325.
12. Blankley, A. I., and E. P. Swanson. 1995. A longitudinal study of SFAS No. 87 pension rate assumptions. Accounting Horizons 9 (4): 1-21.
13. Borrus, A., D. Dwyer, M. Arndt, and D. Welch. 2004. Pumped-up pension plays? Regulators are investigating how some companies tinker with retiree accounting. BusinessWeek (October 25).
14. 2 in accounting research: Measuring changes in value relevance over the last four decades. Journal of Accounting Economics 28 (2): 83-115.
15. Buffet, W., and K. Loomis. 2002. Warren Buffet on the stock market. Fortune.com.
16. Chung, H., and S. Kallapur. 2003. Client importance, nonaudit services, and abnormal accruals. The Accounting Review 78 (4): 931-955.
17. Dye, R. A., and R. E. Verrecchia. 1995. Discretion vs. uniformity: choices among GAAP. The Accounting Review 70 (3): 389-415.
18. Fama, E. F., and K. R. French. 1997. Industry costs of equity. Journal of Financial Economics 43 (2): 153-193.
19. Feldstein, M. S., and R. Morck. 1983. Pension funding decisions, interest rate assumptions, and share prices. In Financial Aspects of the United States Pension System, edited by Z. Bodie, and J. B. Shoven, 177-210. Chicago, IL: University of Chicago Press.
20. Financial Accounting Standards Board. 2004. FASB response to SEC study on the adoption of a principles-based accounting system. Available at http://www.fasb.org/response_sec_study_july2004.pdf.
21. Franzoni, F., and J. M. Marin. 2005. Pension plan funding and stock market efficiency. Working Paper, HEC School of Management, France, and Universitat Pompeu Fabra, Spain.
22. Godwin, J. H., S. R. Goldberg, and J. E. Duchac. 1996. An empirical analysis of factors associated with changes in pension-plan interest-rate assumptions. Journal of Accounting, Auditing and Finance 11 (2): 305-322.
23. Gopalakrishnan, V., and T. F. Sugrue. 1995. The determinants of actuarial assumptions under pension accounting disclosures. Journal of Financial and Strategic Decisions 8(1): 35-41.
24. Graham, J., C. Harvey, and S. Rajgopal. 2006. The economic implications of corporate financial reporting. Journal of Accounting and Economics 40 (1-3): 3-73.
25. Gramlich, J., M. McAnally, and J. Thomas. 2001. Balance sheet management: The case of short-term obligations reclassified as long-term debt. Journal of Accounting Research 39 (2): 283-295.
26. Greenwald, A. G. 1975. Consequences of prejudice against the null hypothesis. Psychological Bulletin 82 (1): 1-20.
27. Guay, W. R., S. P. Kothari, and R. L. Watts. 1996. A market-based evaluation of discretionary-accruals models. Journal of Accounting Research 34 (Supplement): 83-105.
28. Healy, P. M., and K. G. Palepu. 1993. The effect of firms' financial disclosure policies on stock prices. Accounting Horizons 7 (1): 1-11.
29. _, and J. M. Wahlen. 1999. A review of the earnings management literature and its implications for standard setting. Accounting Horizons 13 (4): 365-383.
30. Holthausen, R. W., and R. Watts. 2001. The relevance of the value relevance literature for financial accounting standard setting. Journal of Accounting and Economics 31 (1-3): 3-75.
31. Hunt, A., S. Moyer, and T. Shevlin. 1998. Earnings smoothing and equity value. Working paper, University of Washington, Seattle, WA.
32. Jones, J. J. 1991. Earnings management during import relief investigations. Journal of Accounting Research 29 (2): 193-228.
33. Kallapur, S. P., and S. Kwan. 2004. The value relevance and reliability of brand assets recognized by U.K. firms. The Accounting Review 79 (1): 151-172.
34. Kothari, S. P., and J. Zimmerman. 1995. Price and return models. Journal of Accounting and Economics 20 (2): 155-192.
35. Landsman, W. R. 1986. An empirical investigation of pension fund property rights. The Accounting Review 61 (4): 622-691.
36. Lundelius, Jr., C. 2003. Financial Reporting Fraud: A Practical Guide to Detection and Internal Controls. New York, NY: AICPA. Available at: https://www.cpa2biz.com/CS2000/Products/CPA2BIZ/Publications/Sub+3/ Financial+Reporting+Fraud:+A+Practical+Guide+to+Detection+and+Internal+Control. htm,
37. McNichols, M. F. 2000. Research design issues in earnings management studies. Journal of Accounting and Public Policy 19 (4-5): 313-345.
38. Morgan Stanley. 2003. Yawn or Yell on Pension: An Update. Global Valuation and Accounting Group, July 8. Philadelphia, PA: University of Pennsylvania Press.
39. Ohlson, J. A. 1995. Earnings, book values, and dividends in equity valuation. Contemporary Accounting Research 11 (2): 661-688.
40. Petroni, K. R., S. G. Ryan, and J. Wahlen. 2000. Discretionary and nondiscretionary revisions of loss reserves by property-casualty insurers: Differential implications for future profitability, risk and market value. Review of Accounting Studies 5 (2): 95-107.
41. Sankar, M., and K. R. Subramanyam. 2001. Reporting discretion and private information communication through earnings. Journal of Accounting Research 39 (2): 365-386.
42. Schipper, K. 1989. Commentary on earnings management. Accounting Horizons 3 (4): 91-102.
43. Schultz, E. 2004. SEC investigates six companies on pension, benefit accounting. Wall Street Journal (October 18): A3.
44. Stolowy, J., and G. Breton. 2004. Accounts manipulation: A literature review and proposed conceptual framework. Review of Accounting & Finance 3 (1): 5-68.
45. Subramanyam, K. R. 1996. The pricing of discretionary accruals. Journal of Accounting and Economics 22 (1-3): 249-281.
46. _, and Y. Zhang. 2001. Does stock price reflect future service effects not included in the projected benefit obligation as defined in SFAS 87 and SFAS 32? Working paper, University of Southern California, and Columbia University.
47. Tucker, J., and P. Zarowin. 2006. Does income smoothing improve earnings informativeness? The Accounting Review 80 (1): 251-270.
48. Vuong, Q. H. 1989. Likelihood ratio tests for model selection and non-nested hypotheses. Econometrica 57 (2): 307-333.
49. Wahlen, J. 1994. The nature of information in commercial banks loan loss disclosures. The Accounting Review 69 (3): 455-479.
50. Watts, R., and J. Zimmerman. 1986. Positive Accounting Theory. Upper Saddle River, NJ: Prentice Hall.
51. White, H. 1980. A heteroscedasticity-consistent covariance matrix estimator and a direct test for heteroscedasticity. Econometrica 48: 817-838.