Accounting Commons^™

Earnings Management Strategy Of Pension Plan Changing Firms, Wei Chen

Accounting Dissertations

This study investigates the earnings management strategy of defined benefit pension plan changing firms. I provide the evidence that managers engage in cash conservation activities and real earnings management in response to the changes in funding status and pension income through the manipulation of pension assumptions before and after pension freezing. These results suggest that earnings management through pension assumptions affects the normal operations of the firm through real activities during the defined benefit plan pension freezing. I also provide evidence that pension termination firms exhibit a lower level of discretionary accruals after the termination, suggesting the downsizing of a …