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INVESTOR EVALUATION OF OVERFUNDED PENSION PLAN TERMINATIONS
Author(s) -
Haw InMu,
Ruland William,
Hamdallah Ahmed
Publication year - 1988
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1988.tb00068.x
Subject(s) - pension , pension plan , cash , business , monetary economics , stock (firearms) , plan (archaeology) , finance , stock market , economics , mechanical engineering , paleontology , horse , biology , engineering , history , archaeology
Hundreds of large firms have terminated overfunded pension plans and obtained substantial cash reversions in the past few years. This study reveals a positive and significant market reaction at the time of the termination announcement. The strongest stock price reaction is for firms with large terminations relative to prereversion income. This study demonstrates that real economic gains result from the termination. Specifically, firms terminating overfunded pension plans tend to have tax loss carryforwards that effectively increase the after‐tax returns from termination.