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The Effect of unrecognized pension items on the Company’s Stock Returns

Zieglowski, Philipp (2014) The Effect of unrecognized pension items on the Company’s Stock Returns.

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Abstract:This paper argues whether the market fully reflects the effect of unrecognized pension related items. Using a large sample of US companies where pension obligations are essentially underfunded. If the unrecognized pension obligation is not correctly incorporated into the share price, the stock return will be lower than those of companies with a healthier pension scheme, due to the fact that this pension deficit will affect the company’s income statement in the coming years. I find that companies with large unrecognized pension obligations earn lower risk adjusted returns. This evidence suggests that the market not fully reflect all pension related items when valuing the share price. Further, investors do not anticipate the effect of unrecognized pension items on future earnings.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/65389
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