Premium
The Joint Effects of Corporate Governance and Regulation on the Disclosure of Manager‐Adjusted Non‐GAAP Earnings in the US
Author(s) -
Jennings Ross,
Marques Ana
Publication year - 2011
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2011.02238.x
Subject(s) - accounting , corporate governance , earnings , commission , business , ex ante , earnings management , intervention (counseling) , economics , finance , psychology , psychiatry , macroeconomics
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 are ex ante recurring as well as to adjustments that just meet or beat analysts’ forecasts.