The future performance implications of Non-GAAP firms' investments

• 成果类型: Article
• 署名作者: Ahn, Minkwan; Christensen, Theodore E.; Johnson, Ryan G.; Lewis-Western, Melissa F.
• 署名单位: Sungkyunkwan University (SKKU); University System of Georgia; University of Georgia; Indiana University System; Indiana University Bloomington; Brigham Young University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2024.101760
• 发表日期: 2025
• 关键词: earnings management; information-content; measurement error; cash flow; QUALITY; COSTS

摘要

We investigate whether consistent non-GAAP reporting is associated with investment efficiency. Prior research finds a positive association between non-GAAP reporting and investment levels, concluding that it represents overinvestment. We corroborate this positive association, but additional tests are not consistent with the conclusion of inefficient overinvestment. Specifically, we explore the relation between investment and future cash flows as a proxy for the realization of investments in positive net present value projects. We find that the investments of firms that consistently report non-GAAP metrics are associated with similar or higher future cash flows than the investments of firms reporting only GAAP earnings, which is consistent with efficient investment. We observe similar associations in multiple specifications, performance horizons, and outcome variables, including future returns and earnings. Given the prevalence of non-GAAP reporting and the SEC's ongoing concern with the consequences of non-GAAP disclosure, our analyses offer timely evidence relevant to this important discussion.