Are inter-segment revenues informative about future performance?

K.C. Lin, Kuan-Chen Lin

Research output: Contribution to journalArticlepeer-review

Abstract

his study investigates the degree to which a specific component of segmental disclosure, intersegment transactions, informs future segment-level and firm-level profitability. By using segment data reported under the FAS No. 131 regime, we find a positive association between intersegment revenues and one-year-ahead segment operating profits; this association is weakened by agency costs but not proprietary costs. We also find that the aggregate intersegment revenue reported by a firm is positively associated with future firm-level earnings. However, analysts seem to underreact to information in aggregate intersegment revenue.
Original languageEnglish
Pages (from-to)298-308
JournalAdvances in Accounting
Volume30
Issue number2
StatePublished - Dec 2014

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