Investors' valuation of voluntary and mandatory disclosures: Geographic segment earnings.
Item
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Title
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Investors' valuation of voluntary and mandatory disclosures: Geographic segment earnings.
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Identifier
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AAI9808003
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identifier
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9808003
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Creator
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Shoaf, Victoria.
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Contributor
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Adviser: Joseph Weintrop
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Date
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1997
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Language
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English
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Publisher
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City University of New York.
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Subject
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Business Administration, Accounting
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Abstract
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This dissertation investigates how mandating a particular financial disclosure affects investors' use of the disclosed data. Hypotheses are developed regarding investors' expected use of voluntary disclosures and undisclosed data, before and after regulation. Empirical tests of the hypotheses use the foreign earnings disclosure of U.S. multinationals around the time of the SEC regulation requiring its disclosure in 1970 and around FAS 14 in 1976. The evaluation of the foreign earnings disclosure is made in the context of its importance as a determinant of stock returns.;The test results indicate a significant and differential valuation of foreign earnings for firms that voluntarily disclosed foreign earnings prior to each of the regulations. There is no evidence of a significant difference in the valuation of foreign earnings for non-disclosers. The association between stock price and foreign earnings for non-disclosing firms does not improve after mandated disclosure. The data, now available, is still not priced by investors, suggesting that the requirement for disclosure is not useful to investors. For voluntary disclosers, the disaggregation of total earnings is no longer incrementally informative after regulation.;There is no evidence from these tests to suggest that mandating disclosure of foreign earnings is effective. Firms that benefit from disclosure of this data are found to disclose it voluntarily. There is no evidence to suggest that disclosure adds incremental information to the basic earnings/returns relationship for previously non-disclosing firms, so its usefulness to investors is questionable.;This study contributes to an understanding of the changes in the investor's information environment resulting from mandating specific disclosures. It investigates whether foreign earnings data was used by investors in stock valuation before regulation, whether explicitly disclosed or not, but, more importantly, it examines whether its use by investors changed after disclosure was mandated. Hence, it provides empirical evidence on the effectiveness of mandating the foreign earnings disclosure. Issues concerning disclosure effectiveness are of great concern to standard setters and to user advocates.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
