Stakeholder Conflicts and Cash Flow Shocks: Evidence from Changes in ERISA Pension Funding Rules

54 Pages Posted: 2 Apr 2014 Last revised: 8 May 2018

See all articles by Michael Dambra

Michael Dambra

SUNY at Buffalo - School of Management

Date Written: April 25, 2017

Abstract

In 2012, Congress passed Moving Ahead for Progress in the 21st Century (“MAP-21”), which changed the ERISA pension funding rules such that mandatory pension contributions decreased. Advocates for the bill argued that reducing mandatory contributions would increase firms’ investment. In contrast, I do not find an average increase in investment among the firms benefiting from MAP-21. Rather, I find that firms either hold pension funding relief on their balance sheets as liquid assets or pay out pension funding relief to shareholders. To the extent that managers increase investment in response to MAP-21, it is concentrated in firms with weak governance or ineffective internal controls.

Keywords: MAP-21, pension accounting, ERISA pension funding, investment, payout policy, actuarial manipulation

JEL Classification: M48, G31, G35, J32

Suggested Citation

Dambra, Michael, Stakeholder Conflicts and Cash Flow Shocks: Evidence from Changes in ERISA Pension Funding Rules (April 25, 2017). The Accounting Review: January 2018, Vol. 93, No. 1, pp. 131-159. , Available at SSRN: https://ssrn.com/abstract=2418341 or http://dx.doi.org/10.2139/ssrn.2418341

Michael Dambra (Contact Author)

SUNY at Buffalo - School of Management ( email )

350 Jacobs Management Center
Buffalo, NY 14260-1660
United States
716-645-3237 (Phone)

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