Anti-Corruption Laws and Geographic Segment Reporting

• In Event: 4.02. CSR/ESG Reporting and Accounting Quality

Abstract

This study analyzes the effects of increased exposure to anti-corruption laws on firms’ geographic segment reporting. Using the 2010 adoption of the U.K. Bribery Act (UKBA) and its significant extraterritorial reach for identification, we conduct difference-in-differences analyses comparing changes in the segment reporting of U.S. multinational firms with and without a material business presence in the U.K. We find that exposure to the UKBA leads to less transparent geographic segment reporting with respect to a firm’s perceived corruption exposure. Unlike prior studies that focus on firms’ explicit changes in reported segments (i.e., re-segmenting), we find that these results are mostly attributable to a more subtle mechanism—specifically, without re-segmenting, firms shift the mix of their real business activities to segments which are less transparent regarding perceived corruption exposure. Our findings have implications for segment reporting research and the ongoing debate regarding the efficacy of the current management approach to segment reporting under ASC 280 and IFRS 8.

Authors

• Donal Byard, Baruch College

• Edward Li, Baruch College

• Heemin Lee, Baruch College

• Amanda Sanseverino, Manhattan College