The Information Content of Discretionary Disaggregation
Name
Anderson-SM15MR-Sloan-2022.pdf
Description
Thesis PDF
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711.67 KB
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Adobe PDF
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e3582ad1790b5479692d3a80ec435c64
Author(s)
Anderson, Samuel S.
Advisor(s)
So, Eric C.
Date Issued
February 2022
Publisher
Massachusetts Institute of Technology
Abstract
I examine the information content embedded in firms' decision to disaggregate financial statement line items. I find that the level of disaggregation predicts both current and future performance. I also find that significant changes in discretionary disaggregation are indicative of weak fundamentals. In particular, I document a hump-shaped pattern such that both increases and decreases in discretionary disaggregation are negatively associated with measures of performance. Investors do not unravel this information at the time of filing, resulting in predictable return patterns over time. Together, these findings are consistent with discretionary disaggregation providing an informative-but low saliency-signal regarding firms' fundamental performance.
MIT Department
Sloan School of Management
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