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Are foreign earnings disclosures value-relevant?

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  • Joliet, Robert
  • Muller, Aline

Abstract

This study examines whether foreign region- and country-specific performance disclosures relate differentially to shareholder wealth compared to domestic performance disclosures. Bearing in mind the fact that, in previous literature, empirical findings regarding the value-relevance of geographic performance disparities have been surprisingly conflicting and puzzling, we question in this paper prior sample selection procedures and data treatments. Using an extensive international company-level database, we distinguish between foreign ‘region-’ and ‘country-’specific performance disclosures and find that (1) the use of disaggregated foreign earnings information increases significantly the precision and significance of the value-relevance of foreign performance; (2) the disclosure of positive earnings movements generated in Latin American countries has a consistently negative value impact and (3) the value-relevance of foreign segment disclosures is particularly perceptible for Asian Pacific countries and the United Kingdom, confirming the attractiveness of these areas for foreign direct investment.

Suggested Citation

  • Joliet, Robert & Muller, Aline, 2016. "Are foreign earnings disclosures value-relevant?," Research in International Business and Finance, Elsevier, vol. 37(C), pages 170-183.
  • Handle: RePEc:eee:riibaf:v:37:y:2016:i:c:p:170-183
    DOI: 10.1016/j.ribaf.2015.09.009
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    Keywords

    Firm valuation; Accounting disclosures; Foreign earnings; Multinational firm; Disaggregation;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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