The Impact of SFAS No. 131 on Information and Monitoring
Philip G. Berger
University of Chicago - Booth School of Business
Rebecca N. Hann
University of Maryland
Journal of Accounting Research. Vol. 41, pp. 163-223. May 2003
We investigate the effect of the FASB's new segment reporting standard on the information and monitoring environment. We compare hand-collected, restated SFAS 131 segment data for the final SFAS 14 fiscal year to the historical Statement 14 data. We find that Statement 131 increased the number of reported segments and provided more disaggregated information. Analysts and the market had access to a portion of the new segment information before it was made public, but analyst and market expectations were still altered by the mandated release of the new data. By increasing information disaggregation, the new standard induced firms to reveal previously hidden information about their diversification strategies. The newly revealed information affected market valuations and lead to changes in firm behavior consistent with improved monitoring following adoption of SFAS 131.
Keywords: segment disclosures, financial reporting, regulation, capital market, analysts' forecasts, corporate governance
JEL Classification: M41, M45, G14, G29, G31, G34Accepted Paper Series
Date posted: January 16, 2003
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