Non-GAAP earnings and stock price crash risk

• 成果类型: Article
• 署名作者: Hsu, Charles; Wang, Rencheng; Whipple, Benjamin C.
• 署名单位: Hong Kong University of Science & Technology; Singapore Management University; University System of Georgia; University of Georgia
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2021.101473
• 发表日期: 2022
• 关键词: pro forma earnings; Managers; disclosure; STREET; adoption; news

摘要

We investigate whether non-GAAP earnings disclosures increase stock price crash risk. Consistent with non-GAAP disclosures allowing managers to inflate investors' perceptions about firm performance, our results indicate that income increasing non-GAAP reporting increases crash risk. We also find that managers can use non-GAAP reporting as a substitute for earnings management to withhold bad news from investors (the traditional explanation for crashes). Finally, we find a positive association between non-GAAP reporting and the likelihood of subsequent events that can trigger a crash. Overall, our evidence is consistent with some non-GAAP disclosures exposing investors to risks of large and sudden price declines.(c) 2021 Elsevier B.V. All rights reserved.