Download or read book An Analysis of the Proprietary Costs of Segment Disclosure written by Cristi Anne Gleason and published by . This book was released on 1998 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the proprietary costs of line-of-business (LOB) reporting. Despite research documenting many benefits of LOB reporting, no research has directly examined the proprietary costs resulting from mandatory segment reporting. My empirical examination of proprietary costs supports the theoretical expectation that the expected proprietary costs of LOB reporting exceeded expected related benefits for manufacturing firms that reported segment information only when required to do so by the SEC. Firms that elected not to report segment information voluntarily had higher levels of market power. Hence these firms faced greater expected costs from competitor entry, pressure from labor groups, suppliers and customers, and government regulation. These firms also obtained less additional financing in the years prior to the SEC requirement, consistent with lower expected benefits. However, my results do not provide any evidence that these involuntary reporters subsequently incurred the expected proprietary costs. In contrast, my results show that voluntary reporters were more likely to obtain financing during the voluntary reporting period, suggesting that differing benefits rather than proprietary costs distinguish voluntary and mandated reporters. This result is consistent with the position of the FASB and with statements made by other supporters of segment reporting, dismissing concerns over substantial competitive harm.

Download or read book An Analysis of the Proprietary Costs of Segment Reporting written by Cristi Anne Gleason and published by . This book was released on 1998 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Proprietary Costs and Determinants of Voluntary Segment Disclosure written by Annalisa Prencipe and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Proprietary Costs and Voluntary Segment Disclosure written by Annalisa Prencipe and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper aims to identify some new determinants of the quality of voluntary segment disclosure by using the theoretical framework of Proprietary Costs Theory. The identified new determinants are correspondence between segments and legally identifiable subgroups of companies, level of detail in segment definition, listing status age and growth rate. The paper also provides further evidence to test the impact of some traditional determinants, which are introduced in the model as control variables. The study is carried out in Italy, which proves to be a particularly suitable setting for the analysis because of its limited legal and professional requirements on the topic. To test the hypotheses, a sample of 67 Italian listed companies was selected and a multiple regression model was used. Except for growth rate, all the other new determinants proved to be significantly related to segment reporting quality, consistently to what hypothesized. These results confirm that proprietary costs are particularly relevant for segment reporting, thus limiting the incentive for the companies to provide this information to the market.

Download or read book Quality of Segment Reporting written by Fatin Nur Syafiqa Anuar and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Segment Profitability and the Proprietary and Agency Costs of Disclosure written by Philip G. Berger and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We exploit the change in U.S. segment reporting rules (from SFAS 14 to SFAS 131) to examine two motives for managers to conceal segment profits: proprietary costs and agency costs. Managers face proprietary costs of segment disclosure if the revelation of a segment that earns high abnormal profits attracts more competition and hence reduces the abnormal profits. Managers face agency costs of segment disclosure if the revelation of a segment that earns low abnormal profits reveals unresolved agency problems and hence leads to heightened external monitoring. By comparing a hand-collected sample of restated SFAS 131 segments with historical SFAS 14 segments, we examine at the segment level whether managers' disclosure decisions are influenced by their proprietary and agency cost motives to conceal segment profits. Specifically, we test two hypotheses: (1) when the proprietary cost motive dominates, managers tend to withhold the segments with relatively high abnormal profits (hereafter, the proprietary cost motive hypothesis), and (2) when the agency cost motive dominates, managers tend to withhold the segments with relatively low abnormal profits (hereafter, the agency cost motive hypothesis). Our results are consistent with the agency cost motive hypothesis, whereas we find mixed evidence with regard to the proprietary cost motive hypothesis.

Download or read book Segment Disclosures Proprietary Costs and the Market for Corporate Control written by Philip G. Berger and published by . This book was released on 2003 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent studies provide evidence that the new segment reporting rule, SFAS 131, induced companies to provide more disaggregated segment information. We use adoption of the new standard to identify firms that aggregated segment information under the old standard, SFAS 14, and examine two motives for managers to aggregate segment information. First, withholding proprietary information and, second, avoiding external scrutiny from the market for corporate control. We find firms that increased their segment disclosure on adoption of SFAS 131 (i.e., firms that aggregated segment data under SFAS 14) had higher abnormal profitability and operations with more divergent performance. We do not, however, find a significant decline in abnormal profits for these firms after SFAS 131, suggesting their concerns that more disaggregated reporting would result in competitive harm were unwarranted. We also document a negative association between aggregating segment information and the probability of takeover activities in the pre-SFAS 131 period. Firms that are forced to provide more disaggregated information under the new standard face a higher takeover likelihood in the post-SFAS 131 period. These results suggest that the more disaggregated disclosure generated by the new standard facilitates the market for corporate control.

Download or read book The Determinants of Segment Level Tax Expense Disclosure written by Fabio B. Gaertner and published by . This book was released on 2017 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we examine managers' decision to report segment-level profit on a before-tax or after-tax basis. A consequence of defining segment-level profit on an after-tax basis internally is that segment-level tax expense must be disclosed in the financial statements. Consistent with the management approach underpinning segment reporting rules, we find that firms which appear to be using an after-tax profit measure internally are more likely to report segment-level profit on an after-tax basis. However, this association is only present for operating segments that are defined on a non-geographic basis. In the sample of firms that define operating segments on a geographic basis, proprietary costs considerations, rather than internal reporting, appear to drive managers' reporting decision. Overall, our results suggest managers use discretion to reduce disclosure quality of segment-level tax information for firms with geographic-based operating segments.

Download or read book Proprietary Costs Governance on the Segment Disclosure Decision written by Ana Gisbert and published by . This book was released on 2014 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Focusing on the Spanish setting, traditionally characterized by high ownership concentration and a regulatory framework which has traditionally given more priority to the avoidance of proprietary and competition costs related to segment disclosures than promoting transparency, this paper aims to identify the main factors influencing the segment reporting decision. In particular, we aim to test whether the strength of the concentrated ownership structures together with the remaining pre-IAS reporting philosophy offsets the role of independent directors. If this is the case, it would be in spite of the new IAS/IFRS reporting standards based on relevance and transparency, and would also run counter to the improvements in the Spanish governance framework which strengthens the presence of independent non-executive directors. The empirical evidence suggests that under the new IAS/IFRS reporting philosophy, proprietary costs may have lost relevance due to the introduction of mandatory segment information requirements. In addition, within an institutional context of high ownership concentration independent directors play a significant role in raising the level of reported information. The context of the new IFRS 8 offers new opportunities to observe how governance and proprietary costs affect the new “management approach” for segment reporting classification.

Download or read book Proprietary Versus Non Proprietary Disclosures written by Christian Leuz and published by . This book was released on 2004 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Discretionary disclosure theory suggests that proprietary costs are an important reason why firms often withhold material information. However, empirically testing this hypothesis has proven to be difficult, due especially to the elusive nature of proprietary costs and lack of settings in which proprietary disclosures are voluntary. This paper exploits the fact that that until recently, German firms were not required to disclose business segment reports, which are generally viewed as competitively sensitive and proprietary in nature. Analyzing firms' voluntary business segment disclosures, I find evidence consistent with the proprietary cost hypothesis. As Germany now requires segment reporting by all listed firms, I also examine ex post whether segment reporting is more revealing for those firms that previously chose not to disclose. I find that firms are less likely to voluntarily provide segment reports if segment profitability is more heterogeneous and the average profitability reported in the income statement is less revealing. This finding is also consistent with the proprietary cost hypothesis and shows that segment disclosures are not governed by capital-market considerations alone. I benchmark my findings using voluntary cash flow statement disclosures. In comparison to segment reports, which likely reveal proprietary information to competitors, cash flow statements are less competitively sensitive. I find that cash flow disclosures appear to be governed primarily by capital-market considerations. This finding lends further support to the proprietary cost interpretation of the segment reporting results.

Download or read book Segment Reporting written by Mark Aleksanyan and published by . This book was released on 2015 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper contributes to the debate on segment reporting standards in the UK and Europe and, specifically, the merit of IFRS 8 relative to predecessor standards (SSAP 25 and IAS 14R). We carry out a longitudinal analysis of segment reporting practices of a large sample of listed UK companies, covering all three reporting regimes. Using the Proprietary Cost Theory (PCT) as our theoretical lens, we present evidence consistent with PCT, that proprietary costs considerations influence companies' segment disclosure choices. We show that when companies are required to disclose more detailed accounting information for geographical segments (e.g., when geography is the basis of operating segments, under IFRS 8, or primary segments, under IAS 14R), they choose to define geographical segments in broader geographic areas terms than was the case under SSAP 25. We find that although companies disclose greater quantity of segmental information under IFRS 8 and IAS 14R (than SSAP 25), the more recent standards brought about a notable reduction in (i) the level of specificity of the disclosed geographical segments, and (ii) the quantity of disclosed geographic segment profit data - one of the most important data types for users. While this may have reduced the proprietary costs of segment disclosures, the reduction in disclosure of segmental performance data may have reduced the usefulness of segment reports to investors.

Download or read book Exploring the Influence of Institutional Factors on the Segment Disclosure Practices of Large European Listed Entities written by Nadia Albu and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates how institutional pressures influence segment-related disclosures in the footnotes to financial statements and in the narrative part of the annual reports for 246 non-financial European listed companies. We analyze occurrence, clarity and consistency of segment disclosures regarding segment identification and the measures reported by segment. We employ Oliver's (1991) framework to explore variations in segment disclosures across our sample and to examine the role of the institutional factors for different disclosure strategies. Our analysis suggests that different types disclosure can be linked to specific institutional factors. Mandatory disclosure is explained mostly by Constituents (ie capital market variables) and Control factors (enforcement) while Clarity of disclosures is more likely to be affected by Constituents and Content (proxies for proprietary costs) factors. Companies are more likely to use compromise, avoidance and defiance strategies in determining their segment reporting disclosure behaviours. The differences in the disclosure strategy followed by companies is mostly driven by Constituents and Content. Our evidence will be informative for practitioners, standard setters and regulators in particular as they seek to improve disclosure practices in financial reports.

Download or read book Proprietary Costs and Disclosure Substitution written by Mirko Stanislav Heinle and published by . This book was released on 2020 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study develops and tests a simple model of voluntary disclosure where managers can choose to withhold (i.e., redact) information from mandatory disclosure. We consider a setting where mandatory disclosure is a disaggregated disclosure (e.g., a financial statement), voluntary disclosure is an aggregate disclosure (e.g., an earnings forecast), and the costs of each type of disclosure are distinct. In this setting, we show that concerns about the proprietary cost of mandatory disclosure motivate managers to withhold information from mandatory disclosure and substitute voluntary disclosure. We test our predictions using a comprehensive sample of mandatory disclosures where the SEC allows the firm to redact information that would otherwise jeopardize its competitive position. Consistent with our predictions, we find strong evidence that redacted mandatory disclosure is associated with greater voluntary disclosure.

Download or read book Segmental Reporting in Malaysia written by Nik Nadzirah binti Nik Mohamed and published by . This book was released on 2013 with total page 490 pages. Available in PDF, EPUB and Kindle. Book excerpt: Segment reporting is not a new issue in the disclosure of corporate annual report, either locally or internationally. However, due to the rapid growth experienced by Malaysian companies as a result of globalization and diversified business activities, segment reporting is gaining importance. Since then, there have been many significant changes in the accounting regulation with regards to segment reporting, and apparently, segment information is very much needed in order to better assist stakeholders in making decisions. Hence, this study aims to identify the extents of segment disclosure of financial and non financial information in the corporate annual reports of Malaysian public listed companies. In addition, there is also the need to identify the perception of various stakeholders regarding the importance of financial and non financial information of segment information and to further identify the factors explaining the extents of segment disclosure based on proprietary cost theory. Data for this study were collected through questionnaire surveys, interviews and companies' annual reports. Four years of annual reports were used from a sample of 93 Malaysian public listed companies' and statistical analysis were conducted. The analysis results show that non financial information are more disclosed than financial information. The results also reveal that the introduction of new regulations in FRS 114 has led companies to produce better disclosures than under MASB 22 or previous regulations. The analysis on stakeholders' perception reveals that there is no significant difference towards the importance of financial information among all stakeholders. Financial analysts were found to perceive non financial information as the most important, followed by the group of managers. Overall, non financial information is considered the most essential to all stakeholders in making decisions. Apparently, no significant relationship was found between all independent variables and financial segment disclosure except for number of segment. For the relationship between control variables and financial segment disclosure, only diffusion and return on asset are significant. In contrast, the relationship between independent variables and control variables with non financial segment disclosure are found to be all insignificant. As for interview sessions, results show that company did not highlight significantly the factors of proprietary cost in preparing the segment information disclosure, even though certain determined factors such as cost consideration and sensitivity lead indirectly toward proprietary cost theory. In conclusion, the term proprietary cost theory is still not well-known among preparers of annual report in Malaysian public listed companies. Overall, this study has provided helpful insights to users, preparers, accounting regulators in segment reporting especially in improving the financial reporting so that it is geared to meet stakeholders' expectations.

Download or read book Economic Consequences of Disclosure Regulation written by Ying Zhou and published by . This book was released on 2014 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: Lobbied against the proposed standard would incur higher proprietary disclosure costs from SFAS 131 than other industries and I identify lobbying industries based on companies' comment letters on the Exposure Draft of the standard. I find that an industry was more likely to lobby against the standard if public firms in that industry as a whole commanded a larger market share, enjoyed more persistent abnormal profits, had higher R & D activities, and faced more private competitors. In my primary test I find that after the adoption of SFAS 131, public firms in a lobbying industry experienced a significant decline in their aggregate product market share relative to those in a non-lobbying industry, confirming companies' concerns about the competitive harm of disclosures required by SFAS 131. My study contributes to the literature by providing evidence on the real market-wide effects, as opposed to the informational firm-specific effects, of a disclosure regulation.

Download or read book Segment Disclosures Internal Capital Markets and Firm Value written by Young Jun Cho and published by . This book was released on 2011 with total page 79 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using the adoption of SFAS 131 as an exogenous change in disclosure quality of segment information, this study examines the impact of SFAS 131 on internal capital market efficiency and firm value. It finds that diversified firms that changed their segment definitions on adopting SFAS 131 (i.e., "change firms") experienced greater improvement in capital allocation efficiency in internal capital markets in the postSFAS 131 period relative to the pre-SFAS 131 period than did a control sample of diversified firms that did not change their segment definitions (i.e., "no-change firms"). This result holds in a battery of tests designed to correct for the endogeneity in firms' reporting choices following SFAS 131, suggesting that disclosure quality improves external monitoring and therefore investment efficiency. This study further shows that the improvement in capital allocation efficiency was achieved primarily by firms whose boards of directors were relatively less independent in the pre-SFAS 131 period, suggesting that the strength of internal monitoring moderates the effect of disclosure quality (as a mechanism of external monitoring) on investment efficiency. In addition, it finds that proprietary costs moderate the impact of SFAS 131 on firm value. Specifically, change firms experienced a greater increase in firm value in the post-SFAS 131 period relative to the pre-SFAS 131 period than did no-change firms except for a subsample of firms with high proprietary costs, suggesting that SFAS 131 reduced agency costs but also eroded competitive advantages.

Download or read book Does Location Matter for Disclosure Evidence from Geographical Segments written by Edith Leung and published by . This book was released on 2019 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.