Evaluating the Risk of Unfunded Pension Liabilities: Evidence from the Korean Stock Market

Noh, Jung Hee

doi:2017.46.5.1157

Korean J Financ Stud > Volume 46(5); 2017 > Article

Korean Journal of Financial Studies 2017;46(5):1157-1196.
DOI: https://doi.org/10.26845/KJFS.2017.12.46.5.115 Published online December 31, 2017.

Evaluating the Risk of Unfunded Pension Liabilities: Evidence from the Korean Stock Market

Jung Hee Noh

퇴직연금 과소적립 위험에 대한 한국 주식시장의 평가

노정희

부산대학교

Abstract

This study examines the risks of unfunded pension liabilities on the Korean stock market, through the relationship between pension funding level and future stock returns. If the reserve balance for benefits is below a required minimum level at any fiscal year end, employers should compensate for it in the following three years, which directly affects internal cash resources and firm value. The result shows that the lower the pension funding level, the higher the stock return rate on the Korean stock market. Additionally, I find that this result can derive from firm characteristics such as size and distress risk, rather than a new risk factor.

Key Words: 확정급여형 퇴직연금제도,퇴직급여채무,연금자산적립수준,위험평가,연금회계,Defined Benefit Plan,Pension Funding Level,Pension Risk,Risk Assessment,Unfunded Pension Liabilities