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Discretionary Disclosure in Financial Reporting: An Examination Comparing Internal Firm Data to Externally Reported Segment Data


  • Daniel Bens
  • Philip Berger
  • Steven Monahan


We 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.

Suggested Citation

  • Daniel Bens & Philip Berger & Steven Monahan, 2009. "Discretionary Disclosure in Financial Reporting: An Examination Comparing Internal Firm Data to Externally Reported Segment Data," Working Papers 09-28, Center for Economic Studies, U.S. Census Bureau.
  • Handle: RePEc:cen:wpaper:09-28

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    manufacturing plants; micro-level data; segment reporting; discretionary disclosure; agency costs; proprietary costs;

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