Does Location Matter for Disclosure? Evidence from Geographic Segments

28 Pages Posted: 27 May 2020

See all articles by Edith Leung

Edith Leung

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Arnt Verriest

KU Leuven

Date Written: May/June 2019

Abstract

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: IFRS 8, proprietary disclosure costs, segment reporting

JEL Classification: M41

Suggested Citation

Leung, Edith and Verriest, Arnt, Does Location Matter for Disclosure? Evidence from Geographic Segments (May/June 2019). Journal of Business Finance & Accounting, Vol. 46, Issue 5-6, pp. 541-568, 2019, Available at SSRN: https://ssrn.com/abstract=3604475 or http://dx.doi.org/10.1111/jbfa.12375

Edith Leung (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Arnt Verriest

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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