| This dissertation collects three papers on the corporate finance and capital market implications for firms that sponsor defined benefit pension plans. The first chapter examines changes in the disclosure requirements for the pension footnote introduced by FAS132R. After the change, which mandated increased transparency, firms used less discretion in setting pension assumptions, and the distribution of discretion across firms was reduced. I also find that the market responded to the new disclosures, and used the new information to discriminate the quality of pension expense across firms.;The second chapter investigates how the sponsorship of a defined benefit pension plan influences corporate bankruptcy. The presence of a pension plan, the size of the pension plan, and the financial condition of the pension plan are all determinants of the decision to file for bankruptcy even after controlling for the financial health and total liabilities of the firm. In other words, ;The third chapter examines how the risk of pension plans are reflected in the systematic risk of the firm, and how this relationship has changed in response to changes in pension accounting standards. After the implementation of FAS 158, the market values the risk created by the pension deficit more highly, but discounts the risk created by the investment mismatch between the pension assets and liabilities, especially for plans which are close to being fully funding. In sum, this results in a deterioration in the market's valuation of pension risk after the implementation, contrary to one of the stated objectives of FAS 158. |
