Measurement Errors and Information Content of Segment Reporting

Measurement Errors and Information Content of Segment Reporting This paper assesses the measurement errors inherent in segment reporting. Measurement errors are gauged by comparing the correlation of segment results with their industry to the corresponding correlation for single line-of-business firms operating in the same industry. The findings show that the measurement errors in segment information, particularly earnings, are larger than those in the financial information reported by single line-of-business firms. The cross-sectional variation in the measurement errors can be traced to cost/revenue allocations, management intervention in segment reporting, and the operational structure of multi-segment firms. Market tests indicate that the information content of segment information is inversely related to the estimated measurement errors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Measurement Errors and Information Content of Segment Reporting

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1009633904773
Publisher site
See Article on Publisher Site

Abstract

This paper assesses the measurement errors inherent in segment reporting. Measurement errors are gauged by comparing the correlation of segment results with their industry to the corresponding correlation for single line-of-business firms operating in the same industry. The findings show that the measurement errors in segment information, particularly earnings, are larger than those in the financial information reported by single line-of-business firms. The cross-sectional variation in the measurement errors can be traced to cost/revenue allocations, management intervention in segment reporting, and the operational structure of multi-segment firms. Market tests indicate that the information content of segment information is inversely related to the estimated measurement errors.

Journal

Review of Accounting StudiesSpringer Journals

Published: Sep 30, 2004

References

  • Diversification Strategies, Business Cycles, and Economic Performance
    Amit, R.; Livnat, J.

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