The joint effects of corporate governance and regulation on the disclosure of manager-adjusted non-GAAP earnings in the US

This paper examines the joint effects of corporate governance and regulation by the Securities and Exchange Commission on the disclosure of manager-adjusted non-GAAP (or pro forma) earnings numbers in the United States. We provide evidence that prior to Regulation G investors were misled by disclosures of non-GAAP earnings, but only for disclosures made by firms with weaker corporate governance. After the SEC intervention there is no evidence that investors were still being misled. Furthermore, the effect of the intervention applied to both adjustments that areex anterecurring as well as to adjustments that just meet or beat analysts' forecasts.