ADDITIONAL EVIDENCE ON THE REACTION OF SHAREHOLDERS TO THE REVERSION OF SURPLUS PENSION ASSETS

A dichotomy exists in the literature regarding the share price response to pension reversions. Mitchell and Mulherin (1989) report positive abnormal returns in response to a reversion announcement, but Mittelstaedt and Regier (1990) provide evidence that any abnormal returns are due to contamination or event date misspecification. This article resolves that dichotomy by providing evidence of a relationship between the stock price reaction to the reversion announcement, the financial strength of the plan sponsor, and the type of successor plan adopted subsequent to the reversion.