The Value of U.S. MNC Earnings Changes from Foreign and Domestic Operations

Change in value relevance of quarterly foreign sales data of U.S. multinational corporations after adopting SFAS 131

“…A t-statistic of 4.231 after comparing these two 26 Note that in each of these regression analyses both quarterly change in operating earnings and domestic sales are also significant. However, in all occasions foreign sales are valued at a higher rate than domestic sales, supporting the findings of Bodnar and Weintrop (1997), Christophe (2002), and Hossain and Marks (2005). 27 Suppose the coefficients of a variable in two separate regression equations are b 1 and b 2 , respectively.…”

“…To be consistent with similar prior studies-for example, Bodnar and Weintrop (1997), Christophe (2002), Bodnar et al (2003), and Hossain and Marks (2005), I scale the change in earnings and the changes in both domestic and foreign sales by the market value of equity at the beginning of the quarter q, to normalize the coefficient values and to reduce heteroscedasticity. I use Eq.…”

“…Ronen and Livnat (1981) argue that one reason why voluntary disclosure is made is that management finds the disclosure relevant. If the managers feel that a required disclosure supplies too much proprietary information to 11 For example, see Bodnar and Weintrop (1997), Christophe (2002); Christophe and Pfeiffer Jr. (2002), Thomas (2000a), Hope et al (2007), Jaggi and Zhao (2002), and Liang and Yao (2005).…”

“…Furthermore, Christophe and Pfeiffer Jr. (2002) test the valuation consequence of foreign sales instead of foreign earnings because firms are allowed wide discretion in calculating foreign earnings. 3 Several papers (e.g., Bodnar and Weintrop 1997;Christophe 2002;Christophe and Pfeiffer Jr. 2002;Thomas 2000a;Bodnar et al 2003) test the information content of annual foreign earnings data of multinational firms. Most recently, Hope et al (2007) find that annual foreign earnings are valued at a relatively higher rate after adopting SFAS 131 by applying a long-window association study methodology.…”

Information content of mandatory quarterly foreign sales data of U.S. multinational companies under SFAS 131

“…Thomas (2000a) demonstrates that a trading strategy based upon the change in foreign earnings in the prior year yields abnormal returns for investors. Also utilizing long-window methodology, Christophe (2002) report an association between risk-adjusted returns and the percentage change in annual foreign sales under SFAS No. 14.…”