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dc.contributor.advisorBalsam, Steven
dc.creatorSun, Fang
dc.date.accessioned2020-11-03T15:33:54Z
dc.date.available2020-11-03T15:33:54Z
dc.date.issued2011
dc.identifier.other864885023
dc.identifier.urihttp://hdl.handle.net/20.500.12613/2482
dc.description.abstractIn this dissertation, I investigate the economic consequences of Statement of Financial Accounting Standards No. 158 (SFAS 158). SFAS 158 requires firms to move pension funding status from the footnotes to the balance sheet. Moving pension funding status from a footnote to the balance sheet improves the transparency and understandability of pension accounting, however it at the same time increases the pension liability recognized and decreases the shareholder's equity reported for firms with underfunded pension plans. I investigate whether firms take actions to mitigate the impact of SFAS 158. I also examine whether the market perceptions of the risk and cost of capital differ because of SFAS 158. I first find that while firms reduce the non-pension debt to equity ratio to minimize the cost of SFAS 158, they did not use discretionary accruals to offset the impact of SFAS 158. One interpretation of these findings is that firms' potential responses to the rule depend on the costs and benefits associated with that discretionary behavior. While accrual manipulations do not affect either real operations or cash flows, aggressive accrual manipulations can increase the probability of a qualified opinion from auditors, and financial penalties from regulators (SEC litigation). In contrast, real activity manipulation is more opaque than accounting earnings management, making it more difficult to detect by shareholders, SEC regulators, or auditors. I then find that the market perceived risk proxied by total equity risk increased after SFAS 158. However, I fail to find that the increased total equity risk is generally priced by the equity capital markets. Further analysis indicates that bond spread yield decreases after SFAS 158 for firms with underfunded pension plans, suggesting different behavior of debt investors and equity investors. This finding might be explained by the rich information environment specific to the debt market. Compared with the equity market, the debt market includes mainly sophisticated investors. Sophisticated investors have access to more firm-specific information than other investors. Given their access to potentially more informative data, the debt market response to SFAS 158 is different from the equity market. This dissertation contributes to the debate regarding the effectiveness of the pension accounting reforms incorporated in SFAS 158, and is useful to legislators, regulators, and researchers in assessing the anticipated costs and benefits of SFAS 158. In addition, this study lends support to the stream of research which documents that managers take actions to achieve certain financial reporting goals in response to new accounting rules. This study also provides insight into how firms take real actions to minimize the cost of having an under-funded defined benefit pension plan. Understanding these relationships have implications for interpreting pension numbers reported in the financial statements and designing pension accounting rules that prevent or minimize the possibility that managers take advantage of the complexity and subjectivity associated with pension accounting to influence reported earnings. Finally, this study contributes to the existing literature by highlighting the importance and necessity of considering investor sophistication in studies on recognition vs. disclosure.
dc.format.extent207 pages
dc.language.isoeng
dc.publisherTemple University. Libraries
dc.relation.ispartofTheses and Dissertations
dc.rightsIN COPYRIGHT- This Rights Statement can be used for an Item that is in copyright. Using this statement implies that the organization making this Item available has determined that the Item is in copyright and either is the rights-holder, has obtained permission from the rights-holder(s) to make their Work(s) available, or makes the Item available under an exception or limitation to copyright (including Fair Use) that entitles it to make the Item available.
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/
dc.subjectAccounting
dc.subjectCost of Capital
dc.subjectCost of Debt
dc.subjectMarket Perceived Risk
dc.subjectPensions
dc.subjectReal Earnings Management
dc.subjectSfas 158
dc.titleECONOMIC CONSEQUENCES OF SFAS 158
dc.typeText
dc.type.genreThesis/Dissertation
dc.contributor.committeememberBasu, Sudipta, 1965-
dc.contributor.committeememberElyasiani, Elyas
dc.contributor.committeememberGordon, Elizabeth A. (Associate professor)
dc.description.departmentBusiness Administration/Accounting
dc.relation.doihttp://dx.doi.org/10.34944/dspace/2464
dc.ada.noteFor Americans with Disabilities Act (ADA) accommodation, including help with reading this content, please contact scholarshare@temple.edu
dc.description.degreePh.D.
refterms.dateFOA2020-11-03T15:33:54Z


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