Abstract
This paper aims to identify why and how do the discretionary behavior of managers about the cost allocation of prior service cost occur. Focusing on the situation that the amortization term of prior service cost is shorter than that of actuarial gains and losses, this paper finds two evidences. First, managers seem to manage earnings to meet the target earnings by shortening the amortization term of prior service cost. Second, foreign and/or institutional holdings may discourage managers from this discretionary behavior
