Abstract

http://ssrn.com/abstract=357780
 
 

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Segment Disclosures, Proprietary Costs, and the Market for Corporate Control


Philip G. Berger


University of Chicago - Booth School of Business

Rebecca N. Hann


University of Maryland

December 2002



Abstract:     
Recent studies provide evidence that the new segment reporting rule, SFAS 131, induced companies to provide more disaggregated segment information. We use adoption of the new standard to identify firms that aggregated segment information under the old standard, SFAS 14, and examine two motives for managers to aggregate segment information. First, withholding proprietary information and, second, avoiding external scrutiny from the market for corporate control. We find firms that increased their segment disclosure on adoption of SFAS 131 (i.e., firms that aggregated segment data under SFAS 14) had higher abnormal profitability and operations with more divergent performance. We do not, however, find a significant decline in abnormal profits for these firms after SFAS 131, suggesting their concerns that more disaggregated reporting would result in competitive harm were unwarranted. We also document a negative association between aggregating segment information and the probability of takeover activities in the pre-SFAS 131 period. Firms that are forced to provide more disaggregated information under the new standard face a higher takeover likelihood in the post-SFAS 131 period. These results suggest that the more disaggregated disclosure generated by the new standard facilitates the market for corporate control.

Number of Pages in PDF File: 69

Keywords: discretionary disclosure, financial reporting, proprietary costs, corporate control, corporate governance

JEL Classification: M41, M45, G34

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Date posted: February 5, 2003  

Suggested Citation

Berger, Philip G. and Hann, Rebecca N., Segment Disclosures, Proprietary Costs, and the Market for Corporate Control (December 2002). Available at SSRN: http://ssrn.com/abstract=357780 or http://dx.doi.org/10.2139/ssrn.357780

Contact Information

Philip G. Berger
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-8687 (Phone)
773-834-4585 (Fax)
Rebecca N. Hann (Contact Author)
University of Maryland ( email )
Robert H. Smith School of Business
College Park, MD 20742
United States
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