Determinants of voluntary disclosure of segment information: A re‐examination of the role of diversification strategy

Michael Aitken · Cameron Hooper · Joanne Pickering

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Financial Reporting and XBRL

Abstract

Abstract This paper explores the determinants of management's decision to voluntarily disclose segment information. It is an extension of McKinnon and Dalimunthe (1993) who investigate the role of six hypothesised determinants. Their results indicate that firm size, industry membership, ownership diffusion, and the level of minority interest are related to the voluntary disclosure of segment information. However, they find that leverage and diversification into related versus unrelated industries are not related to this disclosure. It is the diversification finding that motivates our work. This paper explores the effect of differences in data, differences in samples, and differences in the measurement of diversification on the McKinnon and Dalimunthe (1993) results. Using an alternative definition of diversification, we find diversification strategy, firm size, and the level of minority interest to be related to segment disclosure while the results for ownership diffusion and industry are mixed. We find no support for a leverage effect.

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1993VOLUNTARY DISCLOSURE OF SEGMENT INFORMATION BY AUSTRALIAN DIVERSIFIED COMPANIES 1995VOLUNTARY DISCLOSURE OF SEGMENT INFORMATION: FURTHER AUSTRALIAN EVIDENCE 1992VOLUNTARY DISCLOSURE OF FINANCIAL SEGMENT DATA: NEW ZEALAND EVIDENCE 1971Predicting Earnings: Entity versus Subentity Data 1976Predicting Earnings with Sub-Entity Data: Some Further Evidence 1990The Predictive Ability of Geographic Segment Disclosures

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