The Analysis of Segment Reporting Practices – The Case of Entities listed on the BSE

Author:Associate Professor Nadia ALBU, Ph. D.; Associate Professor Cătălin Nicolae ALBU, Ph. D.; Ruxandra MATEESCU, Ph. D. Student

JEL:M41, M48

DOI:

Keywords:IFRS 8, Romania, compliance, type of auditor, institutional investors

Abstract:
The aim of this study is to analyze the segment reporting practices of entities listed on the Bucharest Stock Exchange (first tier) in accordance with IFRS 8 Operating segments. The authors analyze the 2012 annual reports of all 15 non-financial entities included in this tier. They find that only 53.33% of the entities under analysis identify and report operating segments, with an average number of reported segments of 2.87. Medium or high levels of compliance with the requirements of IFRS 8 are found in 53.33% of cases. The authors further investigate the association between the level of compliance with the requirements of IFRS 8 and the following factors: size, profitability, leverage, type of auditor, growth, diffusion of ownership, and presence of institutional investors. Significant statistical associations are found only for the type of auditor, diffusion of ownership, and presence of institutional investors. Results confirm that entities audited by a Big 4 auditor comply to a higher extent, but contradict the predictions of agency theory that a more diffused ownership is associated with better reporting (diffusion of ownership has in our paper a negative coefficient). A new factor, i.e. the presence of institutional investors, is suggested to be very important for segment reporting practices, especially in the case of emerging economies such as Romania.\r\n

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