Discretionary Disclosure in Financial Reporting: An Examination Comparing Internal Firm Data to Externally Reported Segment Data
AbstractWe use confidential, U.S. Census Bureau, plant-level data to investigate aggregation in external reporting. We compare firms’ plant-level data to their published segment reports, conducting our tests by grouping a firm’s plants that share the same four-digit SIC code into a “pseudo-segment.” We then determine whether that pseudo-segment is disclosed as an external segment, or whether it is subsumed into a different business unit for external reporting purposes. We find pseudo-segments are more likely to be aggregated within a line-of-business segment when the agency and proprietary costs of separately reporting the pseudo-segment are higher and when firm and pseudo-segment characteristics allow for more discretion in the application of segment reporting rules. For firms reporting multiple external segments, aggregation of pseudo-segments is driven by both agency and proprietary costs. However, for firms reporting a single external segment, we find no evidence of an agency cost motive for aggregation.
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Bibliographic InfoPaper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 09-28.
Length: 56 pages
Date of creation: Sep 2009
Date of revision:
manufacturing plants; micro-level data; segment reporting; discretionary disclosure; agency costs; proprietary costs;
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