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Author: Philip G. Berger
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Recent studies provide evidence that the new segment reporting rule, SFAS 131, induced companies to provide more disaggregated segment information. We use adoption of the new standard to identify firms that aggregated segment information under the old standard, SFAS 14, and examine two motives for managers to aggregate segment information. First, withholding proprietary information and, second, avoiding external scrutiny from the market for corporate control. We find firms that increased their segment disclosure on adoption of SFAS 131 (i.e., firms that aggregated segment data under SFAS 14) had higher abnormal profitability and operations with more divergent performance. We do not, however, find a significant decline in abnormal profits for these firms after SFAS 131, suggesting their concerns that more disaggregated reporting would result in competitive harm were unwarranted. We also document a negative association between aggregating segment information and the probability of takeover activities in the pre-SFAS 131 period. Firms that are forced to provide more disaggregated information under the new standard face a higher takeover likelihood in the post-SFAS 131 period. These results suggest that the more disaggregated disclosure generated by the new standard facilitates the market for corporate control.
Author: Philip G. Berger
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
Recent studies provide evidence that the new segment reporting rule, SFAS 131, induced companies to provide more disaggregated segment information. We use adoption of the new standard to identify firms that aggregated segment information under the old standard, SFAS 14, and examine two motives for managers to aggregate segment information. First, withholding proprietary information and, second, avoiding external scrutiny from the market for corporate control. We find firms that increased their segment disclosure on adoption of SFAS 131 (i.e., firms that aggregated segment data under SFAS 14) had higher abnormal profitability and operations with more divergent performance. We do not, however, find a significant decline in abnormal profits for these firms after SFAS 131, suggesting their concerns that more disaggregated reporting would result in competitive harm were unwarranted. We also document a negative association between aggregating segment information and the probability of takeover activities in the pre-SFAS 131 period. Firms that are forced to provide more disaggregated information under the new standard face a higher takeover likelihood in the post-SFAS 131 period. These results suggest that the more disaggregated disclosure generated by the new standard facilitates the market for corporate control.
Author: Cristi Anne Gleason
Publisher:
ISBN: 9780591969993
Category :
Languages : en
Pages : 94
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Book Description
This paper examines the proprietary costs of line-of-business (LOB) reporting. Despite research documenting many benefits of LOB reporting, no research has directly examined the proprietary costs resulting from mandatory segment reporting. My empirical examination of proprietary costs supports the theoretical expectation that the expected proprietary costs of LOB reporting exceeded expected related benefits for manufacturing firms that reported segment information only when required to do so by the SEC. Firms that elected not to report segment information voluntarily had higher levels of market power. Hence these firms faced greater expected costs from competitor entry, pressure from labor groups, suppliers and customers, and government regulation. These firms also obtained less additional financing in the years prior to the SEC requirement, consistent with lower expected benefits. However, my results do not provide any evidence that these involuntary reporters subsequently incurred the expected proprietary costs. In contrast, my results show that voluntary reporters were more likely to obtain financing during the voluntary reporting period, suggesting that differing benefits rather than proprietary costs distinguish voluntary and mandated reporters. This result is consistent with the position of the FASB and with statements made by other supporters of segment reporting, dismissing concerns over substantial competitive harm.
Author: Ana Gisbert
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Focusing on the Spanish setting, traditionally characterized by high ownership concentration and a regulatory framework which has traditionally given more priority to the avoidance of proprietary and competition costs related to segment disclosures than promoting transparency, this paper aims to identify the main factors influencing the segment reporting decision. In particular, we aim to test whether the strength of the concentrated ownership structures together with the remaining pre-IAS reporting philosophy offsets the role of independent directors. If this is the case, it would be in spite of the new IAS/IFRS reporting standards based on relevance and transparency, and would also run counter to the improvements in the Spanish governance framework which strengthens the presence of independent non-executive directors. The empirical evidence suggests that under the new IAS/IFRS reporting philosophy, proprietary costs may have lost relevance due to the introduction of mandatory segment information requirements. In addition, within an institutional context of high ownership concentration independent directors play a significant role in raising the level of reported information. The context of the new IFRS 8 offers new opportunities to observe how governance and proprietary costs affect the new “management approach” for segment reporting classification.
Author: Annalisa Prencipe
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This paper aims to identify some new determinants of the quality of voluntary segment disclosure by using the theoretical framework of Proprietary Costs Theory. The identified new determinants are correspondence between segments and legally identifiable subgroups of companies, level of detail in segment definition, listing status age and growth rate. The paper also provides further evidence to test the impact of some traditional determinants, which are introduced in the model as control variables. The study is carried out in Italy, which proves to be a particularly suitable setting for the analysis because of its limited legal and professional requirements on the topic. To test the hypotheses, a sample of 67 Italian listed companies was selected and a multiple regression model was used. Except for growth rate, all the other new determinants proved to be significantly related to segment reporting quality, consistently to what hypothesized. These results confirm that proprietary costs are particularly relevant for segment reporting, thus limiting the incentive for the companies to provide this information to the market.
Author: Annalisa Prencipe
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper aims to identify new determinants of the extent of voluntary segment disclosure by using the theoretical framework of the Proprietary Costs Theory, which states that companies limit voluntary disclosure because of proprietary costs, such as preparation and competitive costs. On the basis of the existing literature on this theory and on segment reporting, three hypotheses are theoretically derived, each correlating the level of segment disclosure to a new determinant, specifically the correspondence between the segments and legally identifiable subgroups of companies, the growth rate and the listing status age. The paper also provides further evidence to test the impact of some "traditional" determinants, introduced in the study as control variables. The hypotheses formulated are empirically verified. The analysis is carried out with reference to Italy, because of its limited legal and professional provisions on the topic. For the empirical test, a sample of 64 Italian listed companies is selected and a multiple regression model is used. Results show that, except for the growth rate, the two other new determinants are significantly related to the extent of segment disclosure. These findings confirm that proprietary costs are particularly relevant and limit the incentive for companies to provide segment information to the market.
Author: Christian Leuz
Publisher:
ISBN:
Category :
Languages : en
Pages : 45
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Discretionary disclosure theory suggests that proprietary costs are an important reason why firms often withhold material information. However, empirically testing this hypothesis has proven to be difficult, due especially to the elusive nature of proprietary costs and lack of settings in which proprietary disclosures are voluntary. This paper exploits the fact that that until recently, German firms were not required to disclose business segment reports, which are generally viewed as competitively sensitive and proprietary in nature. Analyzing firms' voluntary business segment disclosures, I find evidence consistent with the proprietary cost hypothesis. As Germany now requires segment reporting by all listed firms, I also examine ex post whether segment reporting is more revealing for those firms that previously chose not to disclose. I find that firms are less likely to voluntarily provide segment reports if segment profitability is more heterogeneous and the average profitability reported in the income statement is less revealing. This finding is also consistent with the proprietary cost hypothesis and shows that segment disclosures are not governed by capital-market considerations alone. I benchmark my findings using voluntary cash flow statement disclosures. In comparison to segment reports, which likely reveal proprietary information to competitors, cash flow statements are less competitively sensitive. I find that cash flow disclosures appear to be governed primarily by capital-market considerations. This finding lends further support to the proprietary cost interpretation of the segment reporting results.
Author: Chris Bilson
Publisher:
ISBN:
Category :
Languages : en
Pages : 34
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A firm's incentive to disclose has been linked empirically to a range of variables including information asymmetry, agency costs, political costs, and proprietary costs. While the intuition underlying each of the variables seems plausible, Verrecchia (2001) argues that disclosure models can be characterized as an eclectic mingling of highly idiosyncratic economic-based models and challenges researchers to take the first steps to unification. First, we investigate the role of ownership and competition variables in explaining voluntary segment disclosures in Australian firms and find support for both these variables. Second, drawing on theory supported by the corporate governance, strategic management and industrial organization literatures we introduce a new economic variable that unifies both ownership and competition variables. We find that the unifying variable performs better than our model focusing on ownership and competition variables alone. We conduct a series of robustness tests on the model and find that its significance is not affected by the inclusion of disclosure control variables identified in prior literature, the change in standard, and acquisitions and disposals of physical assets.
Author: Fatin Nur Syafiqa Anuar
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Christian Leuz
Publisher: OUP Oxford
ISBN: 0191536830
Category : Business & Economics
Languages : en
Pages : 434
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Book Description
Accounting and the role of accountants has permeated the modern societies. For the most part we have accepted the impartiality and objectivity of accounting and not recognized how accounting systems are embedded in a country's economic and legal framework, much of which is in turn shaped by political processes. This web of interactions results in complex economic and political questions which require accounting researchers to focus on several related trends: information economics, regulatory economics, sociology, and political science. Although considerable progress has been made in the field of accounting, many fundamental questions are still subject to debate. In this book leading international scholars address a number of important questions: · What is the role of accounting in security valuation, decision making and contracting? · What can we learn from economics-based research in accounting? · What is the role of auditing and how can accounting standards be enforced? · What are the cost and benefits of accounting and disclosure regulation? · What is the role of accounting in society? · How does lobbying affect the political process of standard setting? · What are the consequences of the internationalization of standard setting? This seminal book will be of interest to academics, researchers, and graduate students of Accounting, Finance, Business Studies, Sociology, and Political Economy.
Author: International Accounting Standards Committee
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 58
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