The Impact of SFAS No. 14 Segment Information on Price Variability and Earnings Forecast Accuracy

This study provides empirical evidence on the economic effects of Statement of Financial Accounting Standards (SFAS) No. 14 segment disclosures. Required disclosures under this standard subsume those of the Securities and Exchange Commission' (SEC) 1970 line-of-business disclosure rule both in terms of the variables to be disclosed and the degree of decomposition of the consolidated information. Consequently, this study hypothesizes that stock price variability will be greater at the time of, and security analysts' earnings forecasts more accurate following, release of these disclosures. The results of the empirical analysis support these hypotheses. They indicate that SFAS No. 14 segment disclosures convey incremental information over previously reported SEC line-of-business information that is relevant to stockholders and to security analysts.