SFAS No. 131 segment disclosures and the strategy-structure-performance relationship

This study has three parts. The first part focuses at the business segment definition of SFAS No. 131. One of the expected improvements of SFAS No. 131 was to provide business segment information that corresponds to internal organizational structure. I provide an empirical test of whether segment information prepared under SFAS No. 131 discloses the internal organizational structure of a company. The results show that segment information provided in financial reports under SFAS No. 131 is consistent with the internal organizational structures.; The second part of the study uses this publicly available measure of organizational structure to look at the impact of strategy-structure fit on performance. Strategy-structure fit has been studied in the strategy literature in small samples because of lack of organizational structure data. I looked at strategy-structure fit in a large sample for different types of firms. My findings show that: strategy-structure fit exists not only for big firms but for small firms as well; product diversification is the only discriminating factor for service firm's organizational structure; and contrary to previous literature, product and geographic diversity of international division structure firms and worldwide product/service structure firms are not significantly different from each other.; In addition, I look at the impact of strategy-structure fit on firm performance. The link between strategy-structure fit and performance has not been established thoroughly in previous literature. The results show that, strategy-structure fit is negatively related to performance, as measured by profitability. This negative relationship is due to the poor profitability of worldwide geographic area structure firms with high geographic diversification. However, worldwide geographic area structure firms with high geographic diversification perform well in terms of sales growth.; The third part looks at the value of organizational control and performance evaluation mechanisms on firm success. The impact of segment performance measurement on the firm performance in addition to strategy-structure fit is evaluated. The results show that there is consistency between the performance measure employed and the performance achieved.