Non-GAAP Earnings Disclosure in Loss Firms
| Autor: | David Veenman, Edith Leung |
|---|---|
| Rok vydání: | 2018 |
| Předmět: |
Economics and Econometrics
050208 finance Earnings education 05 social sciences Earnings persistence Differential (mechanical device) 050201 accounting Monetary economics Large sample Pro forma Accounting 0502 economics and business Business health care economics and organizations Finance Valuation (finance) |
| Zdroj: | Journal of Accounting Research. 56:1083-1137 |
| ISSN: | 0021-8456 |
| DOI: | 10.1111/1475-679x.12216 |
| Popis: | 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. |
| Databáze: | OpenAIRE |
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