Does Location Matter for Disclosure? Evidence from Geographical Segments
Forthcoming in Journal of Business, Finance and Accounting
45 Pages Posted: 22 Dec 2015 Last revised: 8 Feb 2019
Date Written: February 6, 2019
The segment disclosures of multinational companies provide strategic information. We use the location characteristics of geographic segments to identify the reasons for withholding or disclosing segments. We examine segment data from around the adoption of IFRS 8, a reporting standard that requires firms to reveal more disaggregated information. Consistent with a proprietary cost motive for nondisclosure, we find that segments in regions that are deemed better for business tend to be hidden, while higher entry barriers for a segment are positively related to disclosure. These effects appear to be stronger for firms for which proprietary cost motives are more important. Among the previously unrevealed segments, proprietary costs explain the nondisclosure of segment earnings and other relevant financial information for investors.
Keywords: segment reporting, proprietary disclosure costs, IFRS 8
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