Abstract
Based on hand-collected non-GAAP earnings disclosures from 2001 to mid 2004, this paper finds that firms with communication motives, proxied by historically low returns-GAAP earnings relation, are more likely to disclose non-GAAP earnings in the post-Reg G period than in the preReg G period. In contrast, firms with opportunistic motives, proxied by GAAP loss and negative GAAP EPS changes, are less likely to disclose nonGAAP earnings in the post-Reg G period than in the pre-Reg G period. With additional test results, the findings of this paper appear consistent with Congress’ and the SEC’s intervention in pro-forma reporting practices resulting in improvements in the quality of information provided in nonGAAP earnings disclosures.
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