Value Relevance of Pension Accounting – A Meta-Analysis

Abstract

This paper provides a meta-analytic review of empirical research on the value relevance of pension accounting information developed over more than three decades. It goes beyond qualitative reviews by applying a full set of meta-analytic procedures to summarize existing research findings on a quantitative level. Given little evidence from other jurisdictions, the meta-analysis focuses on studies in the United States. Key results are as follows: (1) All items related to the balance sheet are value relevant but all components of pension expenses are not. (2) Amounts related to the balance sheet however are more relevant than amounts related to the income statement when disclosed in the notes but not when recognized. (3) The value relevance of information on pension plans differs in the set of accounting standards applied and the valuation model employed. The findings imply opportunities for future research, that could expand beyond early stages of pension accounting in the US and particularly address pension accounting under IFRS in multi-country settings or vis-à-vis domestic accounting standards. Overall, the results have implications for the ongoing regulatory debate of standard-setters that strive for improvement and convergence of pension accounting.

Keywords: meta-analysis, value relevance, pension accounting, valuation, firm value, post-employment benefits

Acknowledgements

The author is grateful for helpful comments and suggestions of Michael Dobler, Thomas Günther, Thomas Niemand, Melissa Luckner and Martin Gäumann. This paper was developed while the author was research assistant and PhD candidate at the Technische Universität Dresden (TU Dresden), Germany.