College of Business {College of Business}

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Pension Accruals and Earnings Management

Directory : Faculty : Intellectual Contributions

Intellectual Contribution by Su-Jane Hsieh

Contribution Title

Pension Accruals and Earnings Management


Western American Accounting Association Annual Meeting




Managers have considerable discretion in pension assumptions used to calculate pension cost. Therefore, pension accounting provides an alternative to discretionary accruals for managers to manage earnings. Our study focuses on how pension accruals affect the behavior of managers toward the usage of other discretionary accruals in managing earnings. We find that firms reporting pension income have significantly higher (lower) pension accruals (other discretionary accruals) than the pension expense firms. In addition, for the pension income subgroup, the mean of pension accruals is greater than that of other discretionary accruals. These findings suggest that managers of the pension income subgroup rely more on pension accruals than on other discretionary accruals in earnings management and that the considerable discretion managers have in pension assumptions, especially in expected rate of return, contributes to the higher use of pension accruals for earnings management.

Complete Citation


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