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Segmental Financial Disclosure by Diversified Firms and Security Prices: A Comment .

Russell M. Barefield¹; Eugene E. Comiskey²

¹ Associate Professor of Accounting, University of Arizona. 1 · ² Professor of Industrial Administration, Purdue University. 2

The article comments on the paper "Segmental Financial Disclosure by Diversified Firms and Security Prices," by R.F. Kochanek, published in the April 1974 issue of the journal "The Accounting Review." Kochanek studied the relationship between segmental disclosure by diversified companies and the forecastability of their earnings. Kochanek's test of the impact of segmental disclosure on earning forecasts employs an indirect measure of the forecastability of earnings. While Kochanek's sample companies are diversified, some would appear to fall primarily into industry groups which vary in earnings volatility. The possible impact of number of segments or industry factors on earnings forecastability bears on Kochanek's results only if quality of reporting varies systematically with number of segments or industry affiliation. To test for this, the authors computed the correlation between number of product lines and Kochanek's disclosure scores. Kochanek executed a creative but inadequately controlled piece of research in attempting to study this relationship.

DOI

10.2308/tar-4492058

Volume

50 (4)

Pages

818-821

Language

en

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