The Impact of SFAS No. 131 on Information and Monitoring

Philip G. Berger and Rebecca Hann

Journal of Accounting Research, 2003, vol. 41, issue 2, 163-223

Abstract: We investigate the effect of the Financial Accounting Standards Board's (FASB) new segment reporting standard on the information and monitoring environment. We compare hand‐collected, restated SFAS 131 segment data for the final SFAS 14 fiscal year with the historical SFAS 14 data. We find that SFAS 131 increased the number of reported segments and provided more disaggregated information. Analysts and the market had access to a portion of the new segment information before it was made public, but analyst and market expectations were still altered by the mandated release of the new data. By increasing information disaggregation, the new standard induced firms to reveal previously “hidden” information about their diversification strategies. The newly revealed information affected market valuations and lead to changes in firm behavior consistent with improved monitoring following adoption of SFAS 131.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:bla:joares:v:41:y:2003:i:2:p:163-223

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Journal of Accounting Research is currently edited by Philip G. Berger, Luzi Hail, Christian Leuz, Haresh Sapra, Douglas J. Skinner, Rodrigo Verdi and Regina Wittenberg Moerman

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