Are Foreign Earnings Disclosures Value-Relevant? Disaggregation Solves the Puzzle
IESEG School of Management Lille/Paris; French National Center for Scientific Research (CNRS) - Lille Economie & Management (LEM) UMR 8179
HEC Management School University of Liège; Maastricht University - Limburg Institute of Financial Economics (LIFE)
August 1, 2009
22nd Australasian Finance and Banking Conference 2009
This study examines whether foreign region- and country-specific performance disclosures relate differentially to shareholder wealth compared to domestic performance disclosures. Bearing in mind the fact that, in previous literature, empirical findings regarding the value-relevance of geographic performance disparities have been surprisingly conflicting and puzzling, we question in this paper prior sample selection procedures and data treatments. Using an extensive international company-level database, we distinguish between foreign ‘region-’ and ‘country-’specific performance disclosures and find that (1) the use of disaggregated foreign earnings information increases significantly the precision and significance of the value-relevance of foreign performance; (2) the disclosure of positive earnings movements generated in Latin American countries has a consistently negative value impact and (3) the value-relevance of foreign segment disclosures is particularly perceptible for Asian Pacific countries and the United Kingdom, confirming the attractiveness of these areas for foreign direct investment.
Number of Pages in PDF File: 32
Keywords: firm valuation, accounting disclosures, foreign earnings, multinational firm, disaggregation
JEL Classification: F23, M41, G14working papers series
Date posted: August 26, 2009
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