Skip to Main Content
 

Global Search Box

 
 
 
 

Files

File List


kent1216752185.pdf (938.07 KB)

ETD Abstract Container

Abstract Header

The Impact of Off-Balance-Sheet Pension Liability under SFAS No.87 on Earnings Quality, Cost of Capital, and Analysts’ Forecasts

Peng, Xiaofeng
http://rave.ohiolink.edu/etdc/view?acc_num=kent1216752185

Abstract Details

2008, PHD, Kent State University, College of Business and Entrepreneurship, Ambassador Crawford / Department of Accounting.
This study examines the impact of off-balance-sheet pension liability under Statement of Financial Accounting Standard (SFAS) No. 87 on earnings quality, cost of capital, and analysts’ forecast behavior. Specifically, three questions are investigated: 1) How does reporting of off-balance-sheet pension liability affect earnings quality? 2) How does off-balance-sheet pension liability drive the implied cost of capital? 3) How does off-balance-sheet pension liability influence analysts’ forecast behavior measured as forecast coverage, forecast effort, forecast uncertainty, and forecast consensus? This research predicts a negative association between off-balance-sheet pension liability and earnings quality and a positive relationship between off-balance-sheet pension liability and cost of capital. In addition a positive connection is predicted between off-balance-sheet pension liability and analysts’ forecast effort and forecast uncertainty, a negative interrelation between off-balance-sheet pension liability and analysts’ forecast consensus, and no signed linkage between off-balance-sheet pension liability and analysts’ forecast coverage. Based on the sample from 1986 to 2005, the empirical results show that off-balance-sheet pension liability is negatively associated with earnings quality and analysts’ forecast coverage, and positively related to the implied cost of capital, analysts’ forecast effort and forecast uncertainty. In other words, firms reporting off-balance-sheet pension liability demonstrate poor earnings quality, higher risk premium, less analysts’ forecast coverage, and greater analysts’ forecast effort and forecast uncertainty. This study extends prior pension research by documenting off-balance-sheet pension liability as an accounting parameter affecting earnings quality, a risk factor driving cost of capital, and an element influencing analysts’ forecast behavior. off-balance-sheet pension liability, however, has an inherent measurement problem. It is calculated from corporate financial information filed under SFAS No. 87, which has been subject to criticisms from both theoretical and practical perspectives. The results of this study support the on-balance-sheet financing approach adopted by SFAS No. 158, issued in September 2006, which provides a unique opportunity for a natural and intertemporal experimental setting to revisit the research questions of this study.
Alam Pervaiz, Dr. (Committee Chair)
Kevin Dow, Dr. (Committee Member)
Marvin Troutt, Dr. (Other)
251 p.
Accounting
Off-Balance-Sheet Pension Liability, Earnings Quality, Cost of Capital, and Analysts&8217; Forecasts

Recommended Citations

Citations

  • Peng, X. (2008). The Impact of Off-Balance-Sheet Pension Liability under SFAS No.87 on Earnings Quality, Cost of Capital, and Analysts’ Forecasts [Doctoral dissertation, Kent State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=kent1216752185

    APA Style (7th edition)

  • Peng, Xiaofeng. The Impact of Off-Balance-Sheet Pension Liability under SFAS No.87 on Earnings Quality, Cost of Capital, and Analysts’ Forecasts. 2008. Kent State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=kent1216752185.

    MLA Style (8th edition)

  • Peng, Xiaofeng. "The Impact of Off-Balance-Sheet Pension Liability under SFAS No.87 on Earnings Quality, Cost of Capital, and Analysts’ Forecasts." Doctoral dissertation, Kent State University, 2008. http://rave.ohiolink.edu/etdc/view?acc_num=kent1216752185

    Chicago Manual of Style (17th edition)

kent1216752185
3,610
© 2008, all rights reserved.
This open access ETD is published by Kent State University and OhioLINK.