Apositive study on the business behavior of pension and severance plans and its influences

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Every Japanese company has its employee benefit plans that include some pension and severance plans. But the pension debts have not been disclosed, m 1998 the business accounting deliberation council in Japan promulgated "the opinion about me retirement benefit" and "the accounting principle concerned with the retirement benefits" which include the disclosure of all the retirement benefit debt. The 2000 fiscal year is the first year to adapt the new accounting standard for retirement benefits.This study investigates three main subjects. Is there any cash-flow or other factor to determine its pension and severance plans by a company? How did the companies adapt the new accounting standard for retirement benefits? Does the stock market evaluate the disclosure of all the retirement benefit information? The listed companies on the Tokyo stock market are continuously examined from 1984 to 2001.On investigation of the retirement benefit liability estimation model that is constructed to estimate total amount of retirement benefit, it is observed that to evaluate a company, the relation between its employees' mean age and its discount rate of the retirement benefit is important. The younger its employees are, the worse the influences of the discount rates reduction upon its retirement benefits are. To provide for adapting the new accounting standard for retirement benefits, a lot of companies had some preceding action to reduce the transitional obligation before the 2000 fiscal year. To reduce them to create the trust for its pension plan is much effective. It is observed that the stock market evaluates the disclosure information of retirement benefits leaked out after the promulgation in 1998. It also suggests that one who does not disclose its operation is underestimated in the stock market. Under some relevant accounting system to disclose management, the market evaluates companies taking appropriately balanced cash flow strategies.