The level of pension assets that can cover pension liabilities in firms that operate defined benefit (DB) pensions and the management of pension assets is important information that affects the valuation of the companies in the capital market. This study analyzed the effect of the underfunded risk of DB pension plan on stock returns for firms listed on the Korea Exchange. We examined the relationship between the pension funding ratio and the stock return through multivariate analysis including firm characteristic variables for companies that adopted the DB pension system from 2013 to 2022, when the minimum funding ratio of plan assets for DB was gradually raised in the Employee Retirement Benefit Security Act(ERBSA). The main results of this study are summarized as follows. First, during the sample period, pension funding ratios increasd in accordance with the minimum funding ratio provisions specified in the ERBSA. In addition, the level of the funding ratio and the behavior of asset allocation focused on safe assets showed strong persistence throughout the sample years. Second, for portfolios sorterd by the pension funding ratio, the alpha (risk-adjusted excess return) from the factor model was estimated to be a statistically significant negative sign in the portfolio with high funding ratio, while no statistical significance was found in the portfolio that did not meet the minimum funding ratio. These results imply that the stock prices of firms that meet the minimum funding ratio exhibited the tendency of overvaluation in the market. Furthermore, it was confirmed that such pricing errors are a dominant results in companies that met the minimally required funding ratio but did not meet the overfunding ratio. Third, the robustness of the portfolio analysis results estimated by the factor model was confirmed through panel regression analysis. As a result of the analysis, firms that do not meet the minimum funding ratio show higher stock returns as the funding ratio is lower (the higher the underfunding risk), but firms that achieve the minimum funding ratio do not explain changes in returns. However, even if the minimum accumulation ratio is achieved, companies that do not fully overfunding ratio show an increase in stock returns as the funding ratio increases. These results support the analysis of the factor model earlier, and imply that investors neglected the underfunded risk for firms that have met the minimum funding ratio but do not fully cover the pension liabilities, so the underfunded risk is not reflected in stock price.