Competitive harm and geographic area disclosure under SFAS 131

Prior research documents considerable diversity in the amount of detail provided by companies in complying with the foreign country disclosure requirements of SFAS 131. We posit that the potential competitive harm associated with country specific disclosures provides an incentive for management to avoid making these disclosures. Specifically, we hypothesize that firms with higher potential competitive harm costs will provide less detailed geographic area disclosures. Our results show that, as expected, firms exposed to greater competitive harm costs provide less detailed country specific revenue disclosures. This study helps to explain the diversity in practice with respect to the level of detail provided by companies in their geographic area disclosures under SFAS 131. In addition, it adds to the literature examining the impact of potential competitive harm on disclosures made by U.S. firms, by extending the line of research to geographic area disclosures.