Comparing Non-GAAP EPS in Earnings Announcements and Proxy Statements

• 成果类型: Article
• 署名作者: Black, Dirk E.; Black, Ervin L.; Christensen, Theodore E.; Gee, Kurt H.
• 署名单位: University of Nebraska System; University of Nebraska Lincoln; University of Oklahoma System; University of Oklahoma - Norman; University System of Georgia; University of Georgia; Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3928
• 发表日期: 2022
• 页码: 1353-1377
• 关键词: non-GAAP EPS; CONTRACTING; COMPENSATION; valuation; VALUE RELEVANCE

摘要

We compare non-GAAP earnings per share (EPS) in firms' annual earnings announcements and proxy statements using hand-collected data from U.S. Securities and Exchange Commission filings. We find that proxies for capital market incentives (contracting incentives) are more highly associated with firms' disclosure of non-GAAP EPS in annual earnings announcements (proxy statements). However, we find systematic differences in the properties of firms' non-GAAP earnings and exclusions depending on whether they disclose non-GAAP EPS in both the earnings announcement and the proxy statement. When firms disclose non-GAAP EPS in both documents, we find that nonGAAP EPS is more useful for assessing firm value. Specifically, these firms are more likely to: (1) exclude nonrecurring items, (2) exclude less persistent earnings components, and (3) provide less aggressive non-GAAP EPS. Our results suggest that non-GAAP EPS is higher in quality for investors when disclosed in both the annual earnings announcement and the proxy statement. We provide some of the first large-sample evidence consistent with the use of non-GAAP EPS metrics in both financial reporting and compensation contracting.