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

Daniel Bens, Philip Berger and Steven Monahan

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: 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.

Keywords: manufacturing plants; micro-level data; segment reporting; discretionary disclosure; agency costs; proprietary costs (search for similar items in EconPapers)
Pages: 56 pages
Date: 2009-09
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (2)

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https://www2.census.gov/ces/wp/2009/CES-WP-09-28.pdf First version, 2009 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:09-28

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