Abstract
While research generally agrees on the informativeness of non-GAAP disclosure, evidence on managers' opportunistic non-GAAP reporting has been accumulated as well. Regulators and the press continue their worries about discretionary non-GAAP reporting and its implication on capital markets, even after SEC's several interventions. We explore how the markets price managers' opportunistic non-GAAP reporting and find that aggressive non-GAAP reporting of firms in the negative tail of GAAP earnings surprises and firms that fail to meet GAAP analysts forecast is rewarded in the capital market. Our result illustrates that the market may draw a thin line between non-GAAP's informativeness and opportunism.
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