Analysts’ role in shaping non-GAAP reporting: evidence from a natural experiment

Theodore E. Christensen (), Enrique Gomez (), Matthew Ma () and Jing Pan ()
Additional contact information
Theodore E. Christensen: University of Georgia
Enrique Gomez: Temple University
Matthew Ma: Southern Illinois University Carbondale
Jing Pan: Southern Methodist University

Review of Accounting Studies, 2021, vol. 26, issue 1, No 6, 172-217

Abstract: Abstract We examine how exogenous changes in analyst coverage influence (1) the likelihood that managers will voluntarily disclose customized (non-GAAP) performance metrics and (2) the relative quality of their non-GAAP disclosures. Specifically, we use a quasi-natural-experimental setting in which brokerage firms terminate analyst coverage and find that, following an unanticipated decrease in analyst coverage, managers are more likely to disclose non-GAAP earnings per share (EPS) numbers. We also find that managers become more aggressive in their disclosure choices and that the quality of their non-GAAP exclusions decreases after analysts terminate coverage. These effects are more pronounced among firms losing an analyst with greater ability and firms with weaker corporate governance. Overall, our evidence suggests that analysts’ monitoring deters aggressive non-GAAP reporting.

Keywords: Non-GAAP reporting; Analyst coverage; Information asymmetry; External monitoring (search for similar items in EconPapers)
JEL-codes: G14 G30 M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://link.springer.com/10.1007/s11142-020-09564-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:reaccs:v:26:y:2021:i:1:d:10.1007_s11142-020-09564-7

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1007/s11142-020-09564-7

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

More articles in Review of Accounting Studies from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().