Research On Economic Consequences Of Segment Reporting In Chinese Listed Companies

As the economic globalization comes into being, a lot of companies have broken down the range of operating activities and regions. Diversification has been widespread phenomenon across the world. At the same time, investors' decisions have been gradually affected by the differences of segment profitability, future prospect, and risks. This makes the research on segment information disclosure increased rapidly. However, domestic scholars haven't taken systemic research on the effects to stakeholders of segment reporting standards yet. Taking the implement status of segment reporting standards in China into consideration, this dissertation analyzes and examines the economic consequences of segment reporting from both the aspects of market and company by combining normative and positive research methods. In summary, the main findings of this study are as follows:1. Managers' motives of discretionary disclosure choice and mandatory requirements of standards have significant effects on segment reporting. Voluntary segment disclosure is associated with firm characteristics, while managers tend to withhold segment when they face proprietary costs and agency costs of segment disclosure. Segment reporting standard is the vital constraint due to compelling force. The degree of segment disaggregation becomes the result of management disclosure equilibrium. Market's ability to predict future earnings of multi-segment firms, market risk assessments, enterprise value, market reactions, and financial analysts' forecast ability are all aspects of economic consequences of segment reporting.2. Descriptive statistics for the segment reporting in 2004-2006 provide several meaningful results. A little proportion of companies provides segment reporting. The quality of segment reporting is improving step by step, but differences still exist. The overall quality of segment reporting has much space to improve futher.3. Firms with relatively more disaggregated disclosures have a stronger relation between current return and future earnings than low disclosure firms. As the segment disclosure quality improved, segment reporting can help investors to predict the future of company so that current returns reflect more future earnings news. Moreover, the increases in segment disclosure quality cause returns to depend more heavily on future earnings news, current earnings news become less relevant.4. There is a positive association between the enterprise value attributable to diversification and the quality of firm's segment disclosures. When the number of items disclosed is more than six, additional items have no significant effects on the enterprise value.The main contributions of this dissertation include:1. This study extends the research on the economic consequences of segment reporting from two aspects. Domestic study provides evidence which figures out that relative predictive usefulness by comparing the mean absolute error of each segment-based and consolidated-based forecasting procedure. Domestic studies also focus on the association between the segment reporting and equity capital cost and the market reactions to segment disclosure. Unlike prior studies, we examine the effect of segment disclosure quality on return-earnings relation and on enterprise value.2. This study measures the degree of segment disaggregation and takes it as a proxy for segment disclosure quality. The empirical tests evaluate the value-relevance of segment disclosure quality and provide theoretical supports to mend the accounting standards and regulate information disclosure.