The benefits of article 11 pro forma disclosure

• 成果类型: Article
• 署名作者: Kubic, Matthew
• 署名单位: University of Texas System; University of Texas Austin
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-025-09877-5
• 发表日期: 2025
• 页码: 2768-2821
• 关键词: MANDATORY DISCLOSURE; performance evidence; ANALYSTS FORECASTS; accounting quality; VALUE RELEVANCE; cash flow; earnings; INFORMATION; INVESTMENT; GAAP

摘要

The U.S. Securities and Exchange Commission (SEC) mandates disclosure of Article 11 pro forma financial statements (pro formas) for acquisitions that exceed one of three bright-line materiality thresholds. Motivated by two theories of mandated disclosure, I investigate the conditions under which mandated pro forma disclosure improves forecast accuracy and mitigates incentive alignment problems. My findings indicate that pro formas reduce post-acquisition forecast errors when there is a weak pre-acquisition information environment. The reduction in forecast errors is larger when pro formas contain more income statement disaggregation and footnote disclosure. Using announcement returns, deal failure, and future profitability to measure acquisition quality, I find that pro formas mitigate an incentive alignment problem by increasing transparency. The forecasting and incentive alignment benefits concentrate in the same subsamples, suggesting that pro formas are more likely to mitigate an incentive alignment problem when they help forecast earnings.