Role of country-level characteristics in segment reporting: EU evidence

Based on a country-level characteristics framework, we empirically test the impact of IFRS 8 adoption, the country’s legal system and country-level of legal enforcement, investor protection, conservatism, and closeness between national GAAP and IFRS on both quantity and quality of segment reporting. Using a sample of companies from 15 EU countries covering four years (two years pre and two years post-adoption of IFRS 8), we find that the adoption of IFRS 8 is associated with a decrease in the quantity and an increase in the quality of segment reporting. Moreover, we report that a common law system, country-level of legal enforcement and investor protection have a significant and positive impact on the quantity/quality of segment reporting. While country-level of conservatism and closeness between national GAAP and IFRS are negatively related to the quantity/quality of segment reporting. In addition to firm-level characteristics, this study extends the prior limited literature by documenting the importance of country-level characteristics as factors that enhance segment reporting practices in Europe. We also discuss the research contributions and implications for research, professional practice, and policymakers.