 Pension funding and the cross section of stock returns - The case of GermanyNicola Heusel and Ferdinand Mager Journal of Banking & Finance, 2023, vol. 150, issue C Abstract: We re-examine the relation between the funding of corporate pension plans and a cross-section of stock returns. In Germany, we observe an increasing funding of historically unfunded pension plans. Firms may freely choose to underfund or not even fund pension plans at all. We find that lower funding levels are related to higher unexpected future earnings and higher stock returns. In Germany, firms with lower pension funding levels perform better than expected by the capital market in contrast to the United States and the United Kingdom. The capital market's underreaction to the earnings announcements of firms with highly underfunded pension plans compared to firms with well-funded plans is higher for short- and long-time horizons. The underreaction is substantially lower for firms with more investor attention and less pension plan and firm opacity. Keywords: Pension underfunding; Pension regulation; Market efficiency; Limited attention; Firm opacity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:150:y:2023:i:c:s0378426623000419 DOI: 10.1016/j.jbankfin.2023.106816 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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