1. ¹Rotman School of Management, University of Toronto, Toronto, Canada
2. ²Barry Kaye College of Business, Florida Atlantic University, Davie, USA
3. ³Michael F. Price College of Business, University of Oklahoma, Norman, USA
4. ⁴London Business School, London, UK

Correspondence: WB Thomas, Michael F. Price College of Business, University of Oklahoma, 307 W. Brooks, Room 212B, Norman, OK 73019, USA. Tel: +1 405 325 5789; Fax: +1 405 325 7348; E-mail: wthomas@ou.edu

Received 13 March 2007; Revised 18 December 2007; Accepted 27 December 2007; Published online 23 October 2008.

Abstract

Foreign operations are becoming increasingly important for US companies. We investigate whether the market's valuation of foreign earnings is a function of the firm's geographic segment disclosures. Specifically, we examine the effects of an increase in the number of geographic segments disclosed and the inclusion of earnings measures in geographic segment disclosures following the adoption of SFAS 131. We find strong evidence that our proxies for increased disclosure are positively associated with the valuation of foreign earnings. Our results are robust to a number of sensitivity analyses. Taken together, our results suggest that the pricing of foreign earnings is associated with important aspects of the firm's information environment.