Segment Disclosure and Cost of Capital

Blanco, Belén; Lara, Juan Manuel Garcı́a; Tribó, Josep A.

doi:10.2139/ssrn.1988151

Cited by 9 publications

(10 citation statements)

References 128 publications

(162 reference statements)

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“…Ettredge et al () examine the capital market consequences of SFAS 131 and find that the relationship between current returns and future earnings improves after the adoption of the standard, which implies that SFAS 131 led to improved segment disclosures, enabling the stock market to better predict future earnings. This result is in line with Blanco et al., (), who find that better segment disclosures are associated with lower analyst forecast errors and cost of equity capital. Overall, these studies show that SFAS 131 resulted in better line‐of‐business segment disclosures and that better segment disclosures have positive economic consequences.…”

Section: Prior Literaturesupporting

confidence: 91%

The Impact of IFRS 8 on Geographical Segment Information

Leung

Verriest²

2015

Business Fin & Account

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Section: Prior Literaturesupporting

confidence: 91%

The Impact of IFRS 8 on Geographical Segment Information

Leung

Verriest²

2015

Business Fin & Account

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“…The t test was equal to -1.012, not exhibiting statistical significance -thus making it possible to state that the groups do not have different average returns -similar, for example, to what was found by Blanco et al (2015) in relation to the release of additional information and to competition between companies.…”

Section: Results Of Sensibility Analysismentioning

confidence: 85%

“…Cao et al (2014) showed that forecasts, made by company management, are also able to reduce ke, provided investors are protected. Blanco, Garcia-Lara and Tribo (2015) found that, even in competitive environments, in which releasing extra information could benefit competitors, its release can reduce ke.…”

Section: Introductionmentioning

confidence: 99%

Assimetria Informacional e o Preço das Ações: Análise da Utilização das Redes Sociais nos Mercados de Capitais Brasileiro e Norte-americano

Arruda

Girão

Lucena

2015

Rev. contab. finanç.

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Increasing globalization has meant the internet becoming ever more part of the routine of people around the world. With the evolution of the internet, social networks have emerged in order to facilitate communication between people, communities and even between corporations. Social networks offer companies a way of instantly releasing information, allowing those who use this information greater flexibility when searching for news about the companies in which they have invested or wish to invest. In this context, the objective of this study was to analyze how social networks (Facebook, Twitter and Youtube) affect levels of information asymmetry and the pricing of shares for Brazilian and U.S. public companies during 2012. To achieve the proposed goal, the conceptual framework of the Ohlson model (1995) was used to verify whether the information posted on social networks affects the pricing of shares, and share price volatility was used as a proxy for information asymmetry. The sample included 170 Brazilian companies listed on the BM&FBOVESPA and 100 companies listed on the U.S. stock market in 2012. The results show that social networks can affect levels of information asymmetry in these markets, but only "unofficial" Facebook affects the pricing of shares for companies in the Brazilian stock market, although sensitivity analysis indicated that the groups that use and those that do not use Facebook do not exhibit different average returns. Thus, investors should not use this information to devise strategies to generate better returns.Palavras-chave: social networks, information asymmetry, pricing of shares.

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“…Prior studies find consistent evidence that in the post-SFAS 131 period, firms have improved their information environment by reporting increased number of operating segments and items per operating segment (Berger and Hann, 2003; Botosan and Stanford, 2005), improved earnings predictability (Ettredge et al , 2005), increased cross-segment variability in segment profits (Ettredge et al , 2006) and earnings growth (Wang et al , 2011). As such, the enhanced segment disclosure is value relevant (Hope et al , 2009) and contributes to the reduction of cost of equity capital and cost of debt (Blanco et al , 2015; Chen and Liao, 2015).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…Prior research has examined the determinants and consequences of segment reporting under SFAS 131 (Alfonso et al , 2012; Berger and Hann, 2003; Berger and Hann, 2007; Blanco et al , 2015; Botosan and Stanford, 2005; Chen and Liao, 2015; Ettredge et al , 2006; Muiño and Núñez-Nickel, 2016). This paper complements prior literature by comparing cross-listed firms’ reporting of segment earnings with US firms and explores how home country institutional characteristics influence segment earning reporting among cross-listed firms in the USA [2], [3].…”

Section: Introductionmentioning

confidence: 99%

Segment earnings and managerial incentives: evidence from foreign firms cross-listed in the USA

Sang

Alam

Hinkel

2022

RAF

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Purpose Prior studies find that US firms with managerial incentives may manipulate the earnings gap to obscure higher performing segments to competitors or to hide underperforming segments from external monitors. The purpose of this study is to complement extant research by examining the association between managerial incentives and segment earnings reporting of cross-listed firms in the USA and the impact of country-level characteristics on this association. Design/methodology/approach The dependent variable is the earnings gap between firm-level earnings and sum of segment-level earnings. Managerial incentives are proxied by proprietary cost and agency cost. Proprietary cost is measured by the Herfindahl index. Agency cost is measured by inefficient resource transfer activities across segments. Foreign firms in this study are companies listed on major US Stock Exchanges with headquarters outside the USA. Comparable US firms are selected using the Propensity Score Matching procedure as a control group. Findings The authors find that 1) proprietary cost motive is not the determinant of earnings gap reporting for cross-listed firms; 2) cross-listed firms motivated by agency costs are more likely to manipulate segment earnings reporting than US firms; and 3) among cross-listed firms motivated by agency costs, firms in weak rule of law countries demonstrate more manipulation in segment earnings than firms in strong rule of law countries. Originality/value Extant research with regard to segment reporting exclusively focuses on US firms, and little is known about the practice of segment reporting by cross-listed firms originating from different legal regimes. This study fills the gap in the literature by comparing cross-listed firms to US firms in the reporting of segment earnings. The results of this study have implications for regulators and investors who are interested in evaluating the extent of cross-listed firms’ financial reporting quality.

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Segment Disclosure and Cost of Capital

Cited by 9 publications

References 128 publications

The Impact of IFRS 8 on Geographical Segment Information

The Impact of IFRS 8 on Geographical Segment Information

Assimetria Informacional e o Preço das Ações: Análise da Utilização das Redes Sociais nos Mercados de Capitais Brasileiro e Norte-americano

Segment earnings and managerial incentives: evidence from foreign firms cross-listed in the USA

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