Differential tax benefits and the pension reversion decision

Greg Clinch, Toshi Shibano*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Citations (Scopus)


We document that tax considerations influence whether and when a firm withdraws excess assets in its defined benefit pension plan through a reversion. Since a reversion impacts taxable income over many years and alternative methods of withdrawing excess assets exist, we argue that the economically relevant tax-based decision criterion is its 'differential tax benefit', defined as the difference between the discounted tax savings of reversion versus those of the best alternative withdrawal method. We develop a technique for directly estimating this decision criterion and document that differential tax benefits are strongly correlated with the reversion decision and its timing.

Original languageEnglish
Pages (from-to)69-106
Number of pages38
JournalJournal of Accounting and Economics
Issue number1
Publication statusPublished - 1 Feb 1996
Externally publishedYes


  • Differential tax benefits
  • Marginal tax rates
  • Pension reversion
  • Tax timing
  • Taxes


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