Enhancing Pension Disclosure Transparency: A Gratuity-based Framework for DAX Listed Firms

Description

DOI: https://doi.org/10.5281/zenodo.19566010

Ulla Martina Bauer (Department of Management, Cardif Metropolitan University, Wales)

This study examines how key financial factors, such as financing ratios and future cash flow predictions, affect disclosure practices under IFRS. Despite prior research on the links between pension variables and corporate characteristics, there is limited evidence in IFRS jurisdictions. We analyse critical accounting estimate (CAE) disclosures for 30 DAX-listed companies, using data from 2005 to 2018, comprising 335 observations of CAE disclosures and 380 observations of changes in discount rates and expected asset returns. We found that larger companies and those with different regulatory statuses are more responsive to changes in pension interest rates and expected returns. Clear disclosures can help reduce these sensitivities, while weaker financial conditions lessen the impact. Our results show a strong positive link between profitability and gratuity-related disclosures, with high explanatory power (R² = 0.63-0.72). When viewed through the lens of gratuity theory, the results indicate that more profitable firms are better positioned and more inclined to make accurate and credible assumptions regarding pension and gratuity entitlements. This accentuates the significance of transparent disclosure practices in publicly traded companies. This study contributes to the literature by developing a framework for gratuity-based transparency. The emergent framework integrates regulatory discipline, disclosure incentives, financial capacity, and strategic actuarial alignment to explain pension disclosure practices.