JAPANESE CORPORATE PENSION PLANS AND THE IMPACT ON STOCK PRICES

Abstract: This study focuses on the stock market impact of Japanese corporate decisions to adopt pension plans. Implementing corporate pension plans in Japan is complicated because they are heavily regulated by the government, and the traditional lump-sum-only severance benefit plan already exists, requiring interfacing the newly adopted plans with the existing ones. Using the GARCH estimation method, the market model applied in this paper for the relatively long period 1975-1995 yields evidence that suggests that the stock market responds to some of the more specific characteristics of adopted plans. Alternative specifications of the pension “event ” also suggest that relatively little of the market impact comes from public announcement about pension adoption occasioned by the release of the firm’s financial statement