Are potential effects of SFAS 158 associated with firms' decisions to freeze their defined benefit pension plans?

Cathy Beaudoin, Nandini Chandar, Edward M. Werner

Research output: Contribution to journalArticlepeer-review

16 Scopus citations


Purpose – The purpose of this paper is to examine whether the significant clustering of defined benefit (DB) pension plan freeze announcements during 20012006 is motivated at least in part by accounting concerns due to the Financial Accounting Standards Board's pending adoption of Statement of Financial Accounting Standards No. 158 (SFAS 158). Design/methodology/approach Using logistic regression models, the paper compares 147 “freeze firms” with a matched sample of firms that did not announce a DB plan freeze. Empirical models control for other DB plan motives including as a response to stricter contribution requirements under the Pension Protection Act of 2006 and improving the firm's competitive position. Findings The potential SFAS 158 impact is significantly associated with firms' decisions to freeze their DB plans. Firm profitability is also significantly associated with the freeze decision. However, there is no significant association between cash flow positions or pension plan contributions and the freeze decision. Research limitations/implications It is possible that economic conditions adversely affecting the funded status of DB plans also motivate the freeze decision. While this study controls for the economic environment, economic factors could exacerbate the potential effect of SFAS 158. Originality/value This paper considers potential effects of accounting policy by examining its influence on real management actions and has consequences for a variety of stakeholders including investors, creditors, and, importantly, pension beneficiaries and workers, as DB plans represent implicit contracts between firms and their employees.

Original languageEnglish (US)
Pages (from-to)424-451
Number of pages28
JournalReview of Accounting and Finance
Issue number4
StatePublished - Nov 2 2010
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Accounting
  • General Economics, Econometrics and Finance
  • Finance


  • Accounting standards
  • Benefits
  • Pension funds
  • United States of America


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