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The Impact of SFAS No. 14 Segment Information on Price Variability and Earnings Forecast Accuracy
Author(s) -
Lobo Gerald J.,
Kwon Sung S.,
Ndubizu Gordian A.
Publication year - 1998
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00221
Subject(s) - accounting , earnings , shareholder , financial statement , commission , business , credibility , stock exchange , empirical evidence , stock price , actuarial science , economics , finance , audit , corporate governance , biology , paleontology , philosophy , epistemology , series (stratigraphy) , political science , law
This study provides empirical evidence on the economic effects of Statement of Financial Accounting Standards (SFAS) No. 14 segment disclosures. Required disclosures under this standard subsume those of the Securities and Exchange Commission' (SEC) 1970 line‐of‐business disclosure rule both in terms of the variables to be disclosed and the degree of decomposition of the consolidated information. Consequently, this study hypothesizes that stock price variability will be greater at the time of, and security analysts' earnings forecasts more accurate following, release of these disclosures. The results of the empirical analysis support these hypotheses. They indicate that SFAS No. 14 segment disclosures convey incremental information over previously reported SEC line‐of‐business information that is relevant to stockholders and to security analysts.