ABSTRACT: This paper examines the association between (1) cumulative abnormal stock returns around earnings announcements and (2) geographic sales and geographic earnings data from quarterly segment disclosures by U.S. multinational companies under SFAS No. 131. Only those firms that define their operating segments by geographic area or by a combination of products and services and geographic area are required to disclose this information. The sum of the quarterly earnings (sales) from the foreign geographic segments yields our measure of quarterly foreign earnings (sales). We show that change in quarterly foreign earnings is positively associated with the stock market reaction. Further, the stock market reaction to change in quarterly foreign earnings is different from the stock market reaction to change in quarterly domestic earnings. Quarterly changes in foreign and domestic sales have little additional information content in the presence of quarterly changes in foreign and domestic earnings.
