The effects of SFAS 131 geographic segment disclosures by US multinational companies on the valuation of foreign earnings

Ole-Kristian Hope, Tony Kang, Wayne B Thomas and Florin Vasvari
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Ole-Kristian Hope: Rotman School of Management, University of Toronto, Toronto, Canada
Tony Kang: Barry Kaye College of Business, Florida Atlantic University, Davie, USA
Wayne B Thomas: Michael F. Price College of Business, University of Oklahoma, Norman, USA
Florin Vasvari: London Business School, London, UK

Journal of International Business Studies, 2009, vol. 40, issue 3, 443 pages

Abstract: Foreign operations are becoming increasingly important for US companies. We investigate whether the market's valuation of foreign earnings is a function of the firm's geographic segment disclosures. Specifically, we examine the effects of an increase in the number of geographic segments disclosed and the inclusion of earnings measures in geographic segment disclosures following the adoption of SFAS 131. We find strong evidence that our proxies for increased disclosure are positively associated with the valuation of foreign earnings. Our results are robust to a number of sensitivity analyses. Taken together, our results suggest that the pricing of foreign earnings is associated with important aspects of the firm's information environment. Journal of International Business Studies (2009) 40, 421–443. doi:10.1057/jibs.2008.72

Date: 2009
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