The impact of duration on management's discount rate choice

Abraham Fried, Paquita Davis-Friday and Harry Z. Davis

Research in Accounting Regulation, 2014, vol. 26, issue 2, 217-221

Abstract: Previous research finds that firms increase their assumed discount rates to minimize their reported pension benefit obligation. This paper demonstrates that firms whose pension plans have short durations lower their discount rates (rather than increase them), since a lower discount rate decreases their pension expense. These results are especially relevant in the present climate of low interest rates and more firms freezing their defined benefit pension plans, thereby shortening the duration of their obligations. Given its importance in shaping management motivation we believe that firms should be required to disclose the duration of their future obligations.

Keywords: Pensions; Interest rates; Duration disclosure (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S105204571400037X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reacre:v:26:y:2014:i:2:p:217-221

DOI: 10.1016/j.racreg.2014.09.003

Access Statistics for this article

Research in Accounting Regulation is currently edited by G. Previts

More articles in Research in Accounting Regulation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().