The Empirical Research On China’s Listed Corporation Segment Reporting’s Ability Of Predicting Revenues

With five trends of business merger, more and more transnational corporations expand their business into many different industries and areas. Financial reports that only disclose the information based on the whole company in consolidated financial reports could not satisfy the needs of the related parties any more. In order to solve these problems, segment reporting is invented. On December29th,2000, China’s Ministry of Finance issued the Enterprise Accounting Systems, regards segment reporting as one of the five notes of the financial statements. In2006, China’s Ministry of Finance issued the Enterprise Accounting Standards No.35-Segment Reporting to improve the standards of the disclosure of segment information. In June,2009China’s Ministry of Finance issued the Enterprise Accounting Standards Interpretations No.3, which means our accounting standards get further development in converging with international accounting standards. However, doubts about the usefulness of segment reporting always exist since the beginning. How is the disclosure of China’s listed corporation segment reporting? Can segment reporting actually increase usefulness of information? The thesis will do the positive research on the ability of predicting revenues to support the research of China’s listed corporation segment reporting.The thesis summarized the development of accounting standards of segment reporting, and analyzed the current situation of China’s listed corporation segment reporting. Since there are some differences between the standards issued by SEC and China’s Ministry of Finance, listed corporation can choose different ways to disclose segment information. Most companies choose to disclose segment information in the report of the board of directors with less information and less cost, which is not positive for the uses of financial reports to make decisions. There are only34of280companies choose to disclose segment information in the notes of the financial statements, which can disclose segment information in detail. The Enterprise Accounting Standards Interpretations No.3requires companies to classify segments as operating segment by management method, while SEC requires companies to classify segments as geographic segment, product segment and industry segment. Because of the difference between SEC’s requirements and Interpretations No.3, most companies didn’t make any adjustment after Interpretations No.3issued. It is found that there are several problems about segment reporting in current, such as lack of comparability. These phenomenon are not positive for improving usefulness of segment reporting.The important part of this thesis is the empirical research on the China’s listed corporation segment reporting’s ability of predicting revenues. Based on the former researches, the author designed three models of predicting revenues.280samples from both Shanghai and Shenzhen stock exchanges are selected and made significant tests. The results showed that segment information have better ability on predicting revenues than consolidated information.At last, this thesis summarized results and limitations of research, and provided several suggestions to improve standards of segment reporting.