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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Metadata

Work Title Comparing Non-GAAP EPS in Earnings Announcements and Proxy Statement
Access
Open Access
Creators
  1. Dirk E. Black
  2. Ervin L. Black
  3. Theodore E. Christensen
  4. Kurt H. Gee
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. Institute for Operations Research and the Management Sciences (INFORMS)
Publication Date April 26, 2021
Publisher Identifier (DOI)
  1. 10.1287/mnsc.2020.3928
Source
  1. Management Science
Deposited January 13, 2022

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  • Added Creator Dirk E. Black
  • Added Creator Ervin L. Black
  • Added Creator Theodore E. Christensen
  • Added Creator Kurt H. Gee
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