
Comparing Non-GAAP EPS in Earnings Announcements and Proxy Statement
<jats:p> We compare non-GAAP earnings per share (EPS) in firms’ annual earnings announcements and proxy statements using hand-collected data from U.S. Securities and Exchange Commission filings. We find that proxies for capital market incentives (contracting incentives) are more highly associated with firms’ disclosure of non-GAAP EPS in annual earnings announcements (proxy statements). However, we find systematic differences in the properties of firms’ non-GAAP earnings and exclusions depending on whether they disclose non-GAAP EPS in both the earnings announcement and the proxy statement. When firms disclose non-GAAP EPS in both documents, we find that non-GAAP EPS is more useful for assessing firm value. Specifically, these firms are more likely to: (1) exclude nonrecurring items, (2) exclude less persistent earnings components, and (3) provide less aggressive non-GAAP EPS. Our results suggest that non-GAAP EPS is higher in quality for investors when disclosed in both the annual earnings announcement and the proxy statement. We provide some of the first large-sample evidence consistent with the use of non-GAAP EPS metrics in both financial reporting and compensation contracting. /jats:p<jats:p> This paper was accepted by Brian Bushee, accounting. /jats:p
The final published version can be found at https://doi.org/10.1287/mnsc.2020.3928
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Work Title | Comparing Non-GAAP EPS in Earnings Announcements and Proxy Statement |
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License | In Copyright (Rights Reserved) |
Work Type | Article |
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Publication Date | April 26, 2021 |
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Deposited | January 13, 2022 |
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