Simulated Mergers of Existent Autonomous Firms: A New Approach to Segmentation Research.

The article presents simulated mergers of extent autonomous, single-product firms used to render evidence on the differences in predictive ability between income forecasts based on consolidated earnings and corresponding forecasts based on segmented earnings, in the United States. The simulated merger approach offers the possibility to evade problems of inter-segment transfers and common costs, which also allows the use of quarterly net income as prediction variable. Based on the studies conducted, the segmented earnings may be less useful in making predictions of enterprise profits.