Abstract

http://ssrn.com/abstract=1141341
 
 

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Geographic Earnings Disclosure and Trading Volume


Ole-Kristian Hope


University of Toronto - Rotman School of Management

Wayne B. Thomas


University of Oklahoma - Michael F. Price College of Business

Glyn J. Winterbotham


Winthrop University


Journal of Accounting and Public Policy, Forthcoming

Abstract:     
Beginning with Statement of Financial Accounting Standards No. 131 (SFAS 131), Disclosures about Segments of an Enterprise and Related Information, most U.S. multinational firms no longer disclose geographic earnings in their annual reports. Given the recent growth in foreign operations of U.S. firms and the varying operating environments around the world, information (or lack thereof) related to geographical performance can affect investors' information set. Using empirical tests that closely follow the Kim and Verrecchia (1997) model, we find results consistent with their predictions. Specifically, using a sample of firms with substantial foreign operations, we find evidence of a decrease in event-period private information following adoption of SFAS 131 for firms that no longer disclose geographic earnings. These results suggest that decreased public information (i.e., non-disclosure of geographic earnings) reduces the ability of investors to utilize or generate private information in conjunction with the public announcement of quarterly earnings, which dampens trading. We also find evidence of a decrease in pre-announcement private information following adoption of SFAS 131. This is consistent with an overall improvement in public disclosures that has the effect of reducing differences in the precision of private information across investors in the period prior to the earnings announcement. However, such an effect is observed for both firms which no longer disclose geographic earnings and for firms that continue to disclose geographic earnings.

Keywords: Trading volume, private information, economic theory, segment disclosure, geographic earnings, SFAS 131

JEL Classification: D82, G34, M41, M44, M45

Accepted Paper Series


Not Available For Download

Date posted: June 10, 2008  

Suggested Citation

Hope, Ole-Kristian and Thomas, Wayne B. and Winterbotham, Glyn J., Geographic Earnings Disclosure and Trading Volume. Journal of Accounting and Public Policy, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1141341

Contact Information

Ole-Kristian Hope (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Hope.aspx
Wayne B. Thomas
University of Oklahoma - Michael F. Price College of Business ( email )
Michael F. Price College of Business,
307 W Brooks, Rm 212B
Norman, OK 73019
United States
405-325-5789 (Phone)
405-325-7348 (Fax)
Glyn J. Winterbotham
Winthrop University ( email )
United States
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