Corporate Responses to Segment Disclosure Requirements, Journal of Accounting and Economics
This paper shows through increasing disclosure requirements may induce firms to reduce their value-relevant disclosures. In the absence of segment reporting requirements, an incumbent firm may voluntarily disclose value-relevant information because it can use other, value-irrelevant, information to jam proprietary disclosures. However, when required to disclose segment data, the incumbent may aggregate proprietary information with other value-relevant information to deter entry by a rival. Hence, the firm does not disclose value-relevant information it would have revealed voluntarily in the absence of segment disclosure requirements. In such situations, requiring more disaggregate disclosures can actually decrease price efficiency.
Sridharan, Swaminathan. 1996. Corporate Responses to Segment Disclosure Requirements. Journal of Accounting and Economics. 21(2): 253-275.