The predictive value of expenses excluded from pro forma earnings

• 成果类型: Article; Proceedings Paper
• 署名作者: Doyle, JT; Lundholm, RJ; Soliman, MT
• 署名单位: University of Michigan System; University of Michigan
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1023/A:1024472210359
• 发表日期: 2003
• 页码: 145-174
• 关键词: prices fully reflect; stock-prices; DELISTING BIAS; Cash flows; INFORMATION; accruals; returns; RISK

摘要

We investigate the informational properties of pro forma earnings. This increasingly popular measure of earnings excludes certain expenses that the company deems non-recurring, non-cash, or otherwise unimportant for understanding the future value of the firm. We find, however, that these expenses are far from unimportant. Higher levels of exclusions lead to predictably lower future cash flows. We also find that investors do not fully appreciate the lower cash flow implications at the time of the earnings announcement. A trading strategy based on the excluded expenses yields a large positive abnormal return in the years following the announcement, and persists after controlling for various risk factors and other anomalies.