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The Pervasiveness of Pension Income Reportinig and Its Contribution to Corporate Earnings

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Intellectual Contribution by Su-Jane Hsieh

Contribution Title

The Pervasiveness of Pension Income Reportinig and Its Contribution to Corporate Earnings

Conference

American Accounting Association Annual Meeting

Year

2008

Description

Using publically traded firms with defined-benefit (DB) pension plans as the sample, we found significant number of firms report pension income, rather than pension expense, during 1991-2005. The presence of pension income reporting firms is strongest during the period of 1998-2001 in which, on average, 28% of DB firms reported pension income. However, the number of pension income firms declined drastically starting 2002 to the lowest percentage of 6% in 2005. We also found that more than one third of our sample firms reported at least one pension income during the test period and about 5% (or 90 firms) reported pension income consistently during the 15-year test period. In addition, pension income, on average, contributed to 14.82 cents of every $1 earnings reported by our sample firms over the test period. Moreover, in studying the firm characteristics of our sample firms, we have identified the return spread, leverage and return on assets ratio as the key factors which distinguish pension income firms from pension expense firms.

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