Analysts' role in shaping non-GAAP reporting: evidence from a natural experiment

• 成果类型: Article
• 署名作者: Christensen, Theodore E.; Gomez, Enrique; Ma, Matthew; Pan, Jing
• 署名单位: University System of Georgia; University of Georgia; Pennsylvania Commonwealth System of Higher Education (PCSHE); Temple University; Southern Illinois University System; Southern Illinois University; Southern Methodist University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-020-09564-7
• 发表日期: 2021
• 页码: 172-217
• 关键词: pro forma earnings; street earnings; managers use; information asymmetry; CORPORATE DISCLOSURE; investors; coverage; MARKET; determinants; environment

摘要

We examine how exogenous changes in analyst coverage influence (1) thelikelihoodthat managers will voluntarily disclose customized (non-GAAP) performance metrics and (2) the relativequalityof their non-GAAP disclosures. Specifically, we use a quasi-natural-experimental setting in which brokerage firms terminate analyst coverage and find that, following an unanticipated decrease in analyst coverage, managers are more likely to disclose non-GAAP earnings per share (EPS) numbers. We also find that managers become more aggressive in their disclosure choices and that the quality of their non-GAAP exclusions decreases after analysts terminate coverage. These effects are more pronounced among firms losing an analyst with greater ability and firms with weaker corporate governance. Overall, our evidence suggests that analysts' monitoring deters aggressive non-GAAP reporting.