Gone but not forgotten: Investor reaction to excluded recurring expenses

• 成果类型: Article
• 署名作者: Griffin, Laura; Mcinnis, John
• 署名单位: University of Colorado System; University of Colorado Boulder; University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2025.101799
• 发表日期: 2025
• 关键词: NON-GAAP EARNINGS; pro forma; empirical-analysis; street earnings; analysts; INFORMATION; MODEL; disclosure; valuation; Managers

摘要

Roughly two decades ago, standard setters mandated recognition of two controversial expenses: stock-based compensation (SBC) and amortization of intangibles from acquisitions (AMT). Today, most firms undo GAAP by excluding these recurring expenses from earnings as part of their nonGAAP reporting. Do investors agree? Using short-window returns around quarterly earnings announcements, we find investors react similarly to unexpected SBC/AMT, regardless of firms' exclusion reporting. Further, among excluders, earnings that include SBC or AMT explain investor reaction better than earnings stripped of these items. Thus, these excluded expenses are an important exception to the well-known regularity that investors find non-GAAP earnings more useful than GAAP earnings. Additional tests reveal that exclusion is not informative about future persistence. Overall, our findings suggest that, in general, investors ignore firms' exclusion of recurring expenses, which may offer reassurance to standard setters.