Department of Accountancy

This study examines the manner in which accounting information affects decisions as to the allocation and distribution of economic resources (Tinker, 1985). The specific venue in which this is explored focuses on how the prospect of seizing pension surpluses may motivate corporate takeovers. Financial accounting influences corporate takeovers in the valuation of assets and claims; including pension surpluses. SFAS No. 36 that regulated financial disclosure during the period of this study tended to overstate the magnitude of the pension surplus relative to a going concern measure, by reporting the amount that could be retrieved from the termination of pension plans. The evidence suggests that the magnitude of the pension surplus is an important consideration in the decision to takeover and the decision to terminate the pension plan of the acquired firm.