| Abstract: | This study extends the work of Landsman (1986) by making use of the newly available projected benefit pension obligations (PBO) information. Our analysis documents that investors perceive pension assets and pension liabilities, respectively, as corporate assets and liabilities. We also developed and tested a decomposition model of pension obligations by examining the market valuation of the three components of PBO: vested, non-vested and future salary progression. Our results indicate that future salary progression is indeed considered by market participants as a liability of the firm. The results of the study have important implications for accounting policy making. |
