Did Pension Plan Accounting Contribute to a Stock Market Bubble?

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Abstract
During the 1990s the assets of corporate defined-benefit (DB) pension plans ballooned as a result of the booming stock market. Because of accounting rules for DB plans put in place in 1986, this robust growth provided a substantial, although stealthy, boost to the profits reported by sponsoring corporations. In particular, the extraordinary returns earned on pension assets flowed to the bottom line on corporate income statements through lower net pension cost accruals included in general corporate expenses.

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