Experience with Non-GAAP Earnings and Investors' Pricing of Exclusions

• 成果类型: Article
• 署名作者: McVay, Sarah E.; Rodriguez-Vazquez, Edgar A.; Toynbee, Sara M.
• 署名单位: University of Washington; University of Washington Seattle; City University of New York (CUNY) System; Baruch College (CUNY); University of Texas System; University of Texas Austin
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2021-0645
• 发表日期: 2024
• 页码: 397-427
• 关键词: pro forma earnings; street earnings; Cash flows; analysts; INFORMATION; disclosure; forecasts; persistence; EFFICIENCY; anomalies

摘要

Although the increase in non-GAAP earnings metrics has drawn unfavorable attention from regulators and standard setters, it can provide valuable experience for investors. We investigate whether experience with nonGAAP earnings metrics influences investors' pricing of non-GAAP exclusions. We measure experience as the frequency with which managers or analysts provide non-GAAP earnings over the prior eight quarters and find that experience aids in the pricing of non-GAAP exclusions. Absent prior experience with non-GAAP earnings metrics, investors appear to overestimate the persistence of exclusions at the earnings announcement, which corrects in the following months. Cross-sectional tests suggest that experience facilitates investors' pricing of non-GAAP exclusions by reducing their information processing costs.