Abstract
A growing stream of academic literature studies non-GAAP financial measures in the United States, where the Securities and Exchange Commission issued Regulation G. However, there is no rule in Europe to regulate these voluntary disclosures. We investigate the disclosure of non-GAAP financial measures by European firms, using hand-collected data on the reporting practices of the largest European firms for the fiscal years 2003 to 2005. Our findings reveal that the disclosure of EBIT/EBITDA is much more common in Europe than in the US. Furthermore, the average number of non-GAAP financial measures per press release, when these disclosures occur, is 3. What measures are disclosed and how much emphasis is given to them varies based on several firms' characteristics: size, performance, leverage, corporate governance practices, country and industry affiliation. Finally, only 35% of the non-GAAP financial measures are explained by managers, but that this percentage has been growing.
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