The Relationship Between Non-GAAP Earnings and Aggressive Estimates in Reported GAAP Numbers

• 成果类型: Article
• 署名作者: Guggenmos, Ryan D.; Rennekamp, Kristina; Rupar, Kathy; Wang, Sean
• 署名单位: Cornell University; University System of Georgia; Georgia Institute of Technology; Southern Methodist University
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12434
• 发表日期: 2022
• 页码: 1915-1945
• 关键词: pro forma earnings; market-based evaluation; management; Informativeness; disclosure; emphasis; analysts; income; real; tax

摘要

This study uses a controlled experiment to examine the trade-off between managers' use of non-GAAP and GAAP earnings to satisfy market expectations and how this relationship can be moderated by both formal and informal regulatory attention to non-GAAP earnings. Our key takeaway is that allowing financial reporting discretion in an alternative disclosure channel, that is, non-GAAP earnings, can reduce firms' opportunistic GAAP reporting. However, statements by regulators about increased attention to non-GAAP earnings constrain this channel, and this can result in more aggressive GAAP earnings management and reduced GAAP earnings quality. We triangulate these findings with a survey and archival analyses and find results that are consistent with this primary message. Our study provides evidence relevant to standard setters and regulators that non-GAAP measures may serve an important role even if they can be used opportunistically.