On the robustness of the results of adoption date choice studies: The case of pension accounting

This paper examines the robustness of the results of adoption date choice studies to sample selection criteria, variable set, and the approach to model building. We use the new pension accounting standard (SFAS 87) in our examination. To this end, we develop a model of the relationship between the adoption date of the pension standard and the variables commonly used in adoption date studies. The variables are: (1) Firm size (2) income change prior to the adoption date and proxies for income management; (3) tightness of debt constraints; and (4) extent of the impact of the standard on financial statements.The results are consistent with the smoothing and compensation hypotheses, but not with the size hypothesis. Debt constraints did not have a significant effect on the selection of the adoption date; but, to the extent that the funding status of pension plans is a measure of the income effect of SFAS 87, the results are also consistent with the selection of adoption date to ease accounting-based debt constraints.Further tests indicate that the results of adoption date choice studies depend on the sample selection critiera, the variable set, and the approach to model building. Future researchers should be aware of the sensitivity of the results to these factors.