ABSTRACT
This chapter examines the e ect of a company’s unfunded pen-sion liabilities on its stock market valuation. Using a sample of UK FTSE350 rms with de ned bene t pension schemes, we nd that although unfunded pension liabilities reduce the market value of the rm, the coe cient estimates indicate a less than one-for-one e ect. Moreover, there is no evidence of signi cantly negative subsequent abnormal returns for highly underfunded schemes. ese results suggest that shareholders do take into consideration the unfunded pension liabilities when valuing the rm, but do not fully incorporate all available information.
