Abstract The article reports that the purpose of this study was to investigate the effects of segmental financial disclosure by diversified firms on earnings predictability and stock price volatility. Correlation models and a variability model, based on security prices, were employed to investigate the market reaction to published annual financial reports for a sample of thirty-seven diversified firms which disclosed varying amounts of segmental data during the four years surveyed. General limitations of the study discussed in the paper included the ability of the survey index effectively to differentiate the sample firms into "good" and "poor" reporting subsets, and the possible existence of group characteristics other than differences in segmental disclosure which might generate significantly different stock market reactions. Recognition should also be given to the fact that, whether the firms are "good" or "poor" reporters, in many cases the market has management's consolidated earnings forecast. The empirical results obtained suggest that predictions of future earnings were facilitated by the availability of segment data.
Richard Frank Kochanek (Mon,) studied this question.