The Effect of SFAS No. 131 on the Cross-segment Variability of Profits Reported by Multiple Segment Firms |
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| Authors: | Michael L. Ettredge Soo Young Kwon David B. Smith Mary S. Stone |
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| Affiliation: | (1) School of Business, University of Kansas, 1300 Sunnyside Avenue, Lawrence, KS 66045-7585, USA;(2) Korea University, Seoul, South Korea;(3) University of Nebraska at Lincoln, Lincoln, NE, USA;(4) University of Alabama, Birmingham, AL, USA |
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| Abstract: | Our study assesses whether SFAS No. 131 improved disclosure about the diversity of multiple segment firms’ operations. We find a post-SFAS No. 131 increase in cross-segment variability of segment profits, an increase in the association between reported and inherent cross-segment variability, and an increase in association between reported variability and capital market incentives to disclose. We interpret the results as evidence that SFAS No. 131 increased the transparency of segment profitability disclosures, and as indicating SFAS No. 131 allowed firms depending more on external financing to disclose more about differences in segment profitability. |
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| Keywords: | Segment reporting SFAS No. 131 Transparency Proprietary costs |
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