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L’École de comptabilité vous convie à la présentation de l’étude What gets reported gets managed: Non-GAAP disclosure and earnings management de Darren Henderson de la Wilfrid Laurier University.

La présentation se déroulera en anglais.

Résumé

In this study, we examine the earnings metrics that managers prioritize. Firms use tools such as earnings management and non-GAAP exclusions to achieve performance targets. We model the non-GAAP disclosure choice using voluntary disclosure as a theoretical foundation and find that earnings management costs are minor factors; rather, firms make their decision based on proprietary costs, user demands, and the value of non-GAAP earnings. Next, using data collected from earnings announcements for U.S. firms from 2003-2020, we find that firms disclosing non-GAAP earnings demonstrate significantly less GAAP earnings management than non-disclosing firms using either accruals or real activities. These results extend to firms that switch between disclosing and not disclosing non-GAAP earnings. The reduction in real activity-based earnings management represents an economic benefit associated with non-GAAP reporting. We then argue and find evidence that non-disclosers prioritize meeting GAAP earnings targets while non-GAAP disclosers prioritize meeting non-GAAP earnings targets. Overall, we provide evidence that firms differ in the earnings targets that they prioritize and rationally order the tools available to reach such targets.