Further Evidence on Excess Asset Reversions and Shareholder Wealth

Abstract

This article re-evaluates and extends prior studies examining the effect of the announcement to terminate an overfunded defined benefit pension plan on the value of equity shares of the terminating company. The results of previous studies suggest that termination announcements result in positive returns to shareholders. However, this article shows that the significantly positive results disappear when (1) more precise event dates are used; (2) terminations with confounding events are eliminated; and (3) samples are comprised primarily of terminations occurring after the issuance of joint federal agency guidelines.

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