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Are inter-segment revenues informative about future performance?

Author

Listed:
  • Dong, Xiaobo
  • Lin, K.C.
  • Kuang, Yingxu

Abstract

This 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.

Suggested Citation

  • Dong, Xiaobo & Lin, K.C. & Kuang, Yingxu, 2014. "Are inter-segment revenues informative about future performance?," Advances in accounting, Elsevier, vol. 30(2), pages 298-308.
    • Handle: RePEc:eee:advacc:v:30:y:2014:i:2:p:298-308
    DOI: 10.1016/j.adiac.2014.09.002
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    References listed on IDEAS

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    More about this item

    Keywords

    FAS 131; Inter-segment revenue; Analyst forecast error;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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