Security Market Effects Associated with SFAS No. 131: Reported Business Segments

Security Market Effects Associated with SFAS No. 131: Reported Business Segments In this study we examine the economic impact of the expected shift from the FASB's segment reporting requirements found in SFAS No. 14 to those found in SFAS No. 131. SFAS No. 131 was the joint effort of the United States' FASB and Canada's Accounting Standards Board (AcSB). It requires firms to report segments based on the firm's internal reporting and management arrangements (the management method) rather than on SFAS No. 14's line-of-business method. One alleged deficiency with the line-of-business method is its flexibility that allowed companies to combine segments. Analysts complained that companies abused this flexibility to conceal information. The management method allegedly is less flexible because companies must report segments externally the same way that they manage them internally. We examine the economic impact of the reporting standard shift by first developing company variables related to the alleged concealment of information under SFAS No. 14. These variables help us to explore why companies combine business segments under the line-of-business method and what costs companies are expected to incur when they are forced to implement the management method. Next we identify a series of dates that chronicle when the market received information about the content of SFAS No. 131. Results of the stock return tests suggest that SFAS No. 131 had a significant impact on firms that previously had the greatest incentives to conceal segment information, consistent with the conjecture that the standard imposed unanticipated costs on affected firms. Review of Quantitative Finance and Accounting Springer Journals

Security Market Effects Associated with SFAS No. 131: Reported Business Segments

Loading next page...
Kluwer Academic Publishers
Copyright © 2002 by Kluwer Academic Publishers
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
Publisher site
See Article on Publisher Site


You’re reading a free preview. Subscribe to read the entire article.

DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • No expiration
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches


Start Free Trial

14-day Free Trial

Best Deal — 39% off

Annual Plan

  • All the features of the Professional Plan, but for 39% off!
  • Billed annually
  • No expiration
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.



billed annually
Start Free Trial

14-day Free Trial