Non-GAAP Disclosure Following Going Concern Opinions

Abstract

This paper examines whether firms change their non-GAAP reporting behavior after receiving a first-time going concern opinion (GCO). I find that the likelihood of disclosing non-GAAP earnings decreases while the quality of disclosed non-GAAP earnings increases following the receipt of a first-time GCO. The results are consistent with the notion that managers change their non-GAAP reporting behavior during the period of heightened investor scrutiny. Further analyses indicate that such changes in non-GAAP disclosure are more pronounced in firms with weaker corporate governance.