Are Foreign Earnings Disclosures Value-Relevant? Disaggregation Solves the Puzzle

32 Pages Posted: 26 Aug 2009

See all articles by Robert Joliet

Robert Joliet

IESEG School of Management Lille/Paris; French National Center for Scientific Research (CNRS) - Lille Economie & Management (LEM) UMR 9221

Aline Muller

HEC Management School University of Liège; Maastricht University - Limburg Institute of Financial Economics (LIFE)

Date Written: August 1, 2009

Abstract

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.

Keywords: firm valuation, accounting disclosures, foreign earnings, multinational firm, disaggregation

JEL Classification: F23, M41, G14

Suggested Citation

Joliet, Robert and Muller, Aline, Are Foreign Earnings Disclosures Value-Relevant? Disaggregation Solves the Puzzle (August 1, 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: https://ssrn.com/abstract=1462166 or http://dx.doi.org/10.2139/ssrn.1462166

Robert Joliet

IESEG School of Management Lille/Paris ( email )

Rue de la Digue 3
LILLE, 59000
France
+33 320 545 892 (Phone)
+33 320 574 855 (Fax)

HOME PAGE: http://www.ieseg.fr

French National Center for Scientific Research (CNRS) - Lille Economie & Management (LEM) UMR 9221 ( email )

60 Boulevard Vauban
LILLE, 59016
France

HOME PAGE: http://lem.cnrs.fr

Aline Muller (Contact Author)

HEC Management School University of Liège ( email )

B-4000 Liege
Belgium
+3242327435 (Phone)
+3242327376 (Fax)

Maastricht University - Limburg Institute of Financial Economics (LIFE) ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

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