Three papers on non-gaap earnings

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University of Alabama Libraries

This dissertation explores non-GAAP earnings reporting. The first paper investigates the role that a lack of analyst following plays in the value relevance of non-GAAP earnings. I find that firms without analyst following have non-GAAP earnings that are less value relevant than GAAP. I also find evidence of opportunism in non-GAAP reporting for firms without analysts. The second paper examines the role of opportunism in non-GAAP market reactions. We find that firms with opportunistic non-GAAP reporting avoid the market penalty for missing forecasts. However, these same firms have future performance that is more consistent with firms that miss current forecasts. This finding suggests that investors are misled by opportunism in the short-run. The third paper looks into the role that consistent or inconsistent opportunism has in market reactions to non-GAAP earnings. We provide evidence that suggests that the market incentivizes ceasing opportunistic non-GAAP earnings. We also find that individual investors have a preference for consistently non-opportunistic non-GAAP reporting. The findings of this dissertation are relevant to investors, regulator, and researchers.

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