Does the Financial Market Fully Price Unfunded Pension Liabilities in Australia: Evidence from Corporate Defined-benefit Superannuation

As one of the older but still widespread forms of superannuation in Australia, the majority of defined benefit funds in Australia have experienced significant deficits since the beginning of the global financial crisis. Due to the presence of complex actuarial assumptions and far-from-transparent accounting disclosure, these deficits may not yet be fully manifested in financial markets. In this paper, a unique dataset comprising the defined benefit obligations of Australian listed firms over 2005 - 2010 is investigated to empirically test whether these unfunded pension liabilities are completely priced in Australian financial markets. Our study has important implications for corporate finance and accounting policy.