Proprietary Costs and Determinants of Voluntary Segment Disclosure: Evidence from Italian Listed Companies

Posted: 3 Jun 2004

See all articles by Annalisa Prencipe

Annalisa Prencipe

Bocconi University - Department of Accounting


This paper aims to identify new determinants of the extent of voluntary segment disclosure by using the theoretical framework of the Proprietary Costs Theory, which states that companies limit voluntary disclosure because of proprietary costs, such as preparation and competitive costs. On the basis of the existing literature on this theory and on segment reporting, three hypotheses are theoretically derived, each correlating the level of segment disclosure to a new determinant, specifically the correspondence between the segments and legally identifiable subgroups of companies, the growth rate and the listing status age. The paper also provides further evidence to test the impact of some "traditional" determinants, introduced in the study as control variables. The hypotheses formulated are empirically verified. The analysis is carried out with reference to Italy, because of its limited legal and professional provisions on the topic. For the empirical test, a sample of 64 Italian listed companies is selected and a multiple regression model is used. Results show that, except for the growth rate, the two other new determinants are significantly related to the extent of segment disclosure. These findings confirm that proprietary costs are particularly relevant and limit the incentive for companies to provide segment information to the market.

Keywords: Proprietary Costs Theory, disclosure determinants, segment reporting, voluntary disclosure, disclosure extent, Italian listed companies

JEL Classification: M41, M45, M47

Suggested Citation

Prencipe, Annalisa, Proprietary Costs and Determinants of Voluntary Segment Disclosure: Evidence from Italian Listed Companies. European Accounting Review, Vol. 13, No. 2, pp. 319-340, 2004, Available at SSRN:

Annalisa Prencipe (Contact Author)

Bocconi University - Department of Accounting ( email )

Via Roentgen 1
Milan, 20136

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