Market reaction to non-GAAP earnings around SEC regulation. Issue 3 (December 2017)

• Record Type: Journal Article
• Authors: Bond, David; Czernkowski, Robert; Lee, Yong-Suk; Loyeung, Anna
• Is Part Of: Journal of contemporary accounting & economics. Volume 13:Issue 3(2017:Dec.)
• Page Start: 193
• Page End: 208
• Publication Date: 2017-12
• Subjects: Non-GAAP earnings -- Non-GAAP exclusions -- Regulation G -- C&DIs -- Analysts' forecasts -- ERCs; Accounting -- Periodicals; Accounting -- Research -- Periodicals; Accounting -- Periodicals; Accounting; Accounting -- Research; Periodicals; 657.05
• DOI: 10.1016/j.jcae.2017.09.001
• Languages: English
• ISSNs: 1815-5669

Abstract

Abstract: This study examines the impact of Regulation G in 2003 and the issuance of Compliance and Disclosure Interpretations (C&DIs) in 2010 – on the reporting of non-GAAP earnings. The study finds that (i) both Regulation G and C&DIs are associated with an increase in the quality of non-GAAP earnings exclusions (i.e. the exclusions are more transitory and have less predictive power for future operating earnings). (ii) Regulation G led to a decrease in the amount of total positive exclusions used to meet or beat analysts' forecasts, but C&DIs partially reversed this result. (iii) Regulation G increases, and C&DIs decrease, the earnings response coefficients (ERCs).