SEC interventions and the frequency and usefulness of non-GAAP financial measures

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Abstract

This paper examines the effect of two Securities and Exchange Commission regulatory interventions related to disclosure of non-GAAP financial measures. There are three main results. First, the probability of disclosure of non-GAAP earnings declines in 2003, but the probability of disclosure of other non-GAAP financial measures has an accelerated decline after the first intervention. Second, all else equal, after Regulation G, investors have a positive market reaction to the disclosure of non-GAAP earnings. Finally, investors react to the adjustments made by I/B/E/S financial analysts as they do to the GAAP surprise, but they do not react to the additional adjustments made by firms.

Original languageEnglish
Pages (from-to)549-574
Number of pages26
JournalReview of Accounting Studies
Volume11
Issue number4
DOIs
Publication statusPublished - Dec 2006

Keywords

  • Disclosure
  • Financial analysts
  • Non-GAAP financial measures
  • Pro forma

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