The Impact of SFAS No. 131 on Information and Monitoring

Posted: 16 Jan 2003  

Philip G. Berger

University of Chicago - Booth School of Business

Rebecca N. Hann

University of Maryland - Robert H. Smith School of Business

Abstract

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, G34

Suggested Citation

Berger, Philip G. and Hann, Rebecca N., The Impact of SFAS No. 131 on Information and Monitoring. Journal of Accounting Research. Vol. 41, pp. 163-223. May 2003. Available at SSRN: https://ssrn.com/abstract=357761

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 - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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