Review of Accounting Studies
Volume 11, March 2006, Issue 1, pp 91–117
 

Michael L. Ettredge, Soo Young Kwon, David B. Smith & Mary S. Stone
https://link.springer.com/article/10.1007/s11142-006-6397-9
DOI: 10.1007/s11142-006-6397-9

Abstract
Our study assesses whether SFAS No. 131 improved disclosure about the diversity of multiple segment firms’ operations. We find a post-SFAS No. 131 increase in cross-segment variability of segment profits, an increase in the association between reported and inherent cross-segment variability, and an increase in association between reported variability and capital market incentives to disclose. We interpret the results as evidence that SFAS No. 131 increased the transparency of segment profitability disclosures, and as indicating SFAS No. 131 allowed firms depending more on external financing to disclose more about differences in segment profitability. Keywords Segment reporting SFAS No. 131 Transparency Proprietary costs