The elusive relation between pension discount rates and deficits

Seth Armitage*, Ronan Gallagher, Jiaman Xu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

The relation between defined-benefit (DB) pension discount rates and funding status is more complex than it might first appear. Existing evidence suffers from estimation biases that make precise inference unreliable. We document the biases and quantify their impact on inference in relation to corporate window-dressing of DB funding status. Our empirical evidence from the United Kingdom suggests that pension sponsors use discretion in the choice of pension discount rate not only to reduce reported deficits but also to reduce reported surpluses.

Original languageEnglish
JournalJournal of Business Finance and Accounting
Early online date28 Sept 2022
Publication statusE-pub ahead of print - 28 Sept 2022

Keywords / Materials (for Non-textual outputs)

  • benchmark discount rate
  • defined benefit pension scheme
  • funding status
  • pension discount rate
  • window-dressing


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