Non-GAAP Earnings Disclosure in Loss Firms

• 成果类型: Article
• 署名作者: Leung, Edith; Veenman, David
• 署名单位: Erasmus University Rotterdam; Erasmus University Rotterdam - Excl Erasmus MC; University of Amsterdam
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12216
• 发表日期: 2018
• 页码: 1083-1137
• 关键词: pro forma earnings; future cash flows; Causal Inference; street earnings; STOCK-OPTIONS; relative informativeness; regression adjustment; operating earnings; MARKET-EFFICIENCY; propensity score

摘要

This study examines the incremental information in loss firms' non-GAAP earnings disclosures relative to GAAP earnings. Using a large sample obtained through textual analysis and hand-collection, we posit and find that loss firms' non-GAAP earnings exclusions offset the low informativeness of GAAP losses for forecasting and valuation. Loss firms' non-GAAP earnings are highly predictive of future performance and are valued by investors, while the expenses excluded from GAAP earnings are not. Additional tests suggest that loss firms disclosing non-GAAP profits have significantly better future performance than GAAP-only loss firms and are not overvalued by investors. Comparing non-GAAP earnings of profitable firms to those of loss firms, we find that loss firms' non-GAAP metrics are significantly more predictive and less strategic. We conclude that non-GAAP earnings disclosures are particularly informative about loss firms and help investors disaggregate losses into components that have differential implications for forecasting and valuation.