Disentangling Managers’ and Analysts’ Non‐GAAP Reporting |
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| Authors: | JEREMIAH W BENTLEY THEODORE E CHRISTENSEN KURT H GEE BENJAMIN C WHIPPLE |
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| Affiliation: | 1. Isenberg School of ManagementUniversity of Massachusetts Amherst;2. J. M. Tull School of Accounting, Terry College of BusinessUniversity of Georgia;3. Graduate School of BusinessStanford University |
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| Abstract: | Researchers frequently proxy for managers’ non‐GAAP disclosures using performance metrics available through analyst forecast data providers (FDPs), such as I/B/E/S. The extent to which FDP‐provided earnings are a valid proxy for managers’ non‐GAAP reporting, however, has been debated extensively. We explore this important question by creating the first large‐sample data set of managers’ non‐GAAP earnings disclosures, which we directly compare to I/B/E/S data. Although we find a substantial overlap between the two data sets, we also find that they differ in systematic ways because I/B/E/S (1) excludes managers’ lower quality non‐GAAP numbers and (2) sometimes provides higher quality non‐GAAP measures that managers do not explicitly disclose. Our results indicate that using I/B/E/S to identify managers’ non‐GAAP disclosures significantly underestimates the aggressiveness of their reporting choices. We encourage researchers interested in managers’ non‐GAAP reporting to use our newly available data set of manager‐disclosed non‐GAAP metrics because it more accurately captures managers’ reporting choices. |
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| Keywords: | M40 M41 M48 non‐GAAP earnings financial analysts voluntary disclosure earnings announcements reporting quality |
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