Determinants of Actuarial Valuation Method Changes for Pension Funding and Reporting: Evidence from the UK

Posted: 17 Jul 2000

See all articles by Paul J. M. Klumpes

Paul J. M. Klumpes

Aalborg University Business School

Mark Whittington

Warwick Business School

Date Written: Undated

Abstract

This study examines various factors that potentially explain cross-sectional variations in UK firms' managerial discretion to switch towards a market-based actuarial pension valuation method for pension funding and reporting purposes. Evidence is based on accounting, actuarial and stock market data for an industry-matched pair sample of 62 UK firms. We find a significant relationship between the switching decision and the sponsoring firms' flow funding of the pension plan, as well as pension earnings in the pre-switch valuation year. These findings imply that UK firms' switching decisions are potentially explained by characteristics of the pension funds they sponsor, and contradict the findings of earlier U.S. based studies, which imply that these choices can be explained from a corporate financial perspective.

Keywords: Actuarial valuation method; Pension funding

JEL Classification: M41, J32, J53

Suggested Citation

Klumpes, Paul J.M. and Whittington, Mark, Determinants of Actuarial Valuation Method Changes for Pension Funding and Reporting: Evidence from the UK (Undated). Available at SSRN: https://ssrn.com/abstract=233401

Paul J.M. Klumpes (Contact Author)

Aalborg University Business School ( email )

Fredrik Bajers Vej 7E
Aalborg, DK-9220
Denmark

Mark Whittington

Warwick Business School ( email )

Accounting and Finance Group
Coventry CV4 7AL
United Kingdom
+44 1203 522138 (Phone)
+44 1203 523 779 (Fax)

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