The impact of the SEC's regulation of non-GAAP disclosures

Frank Heflin and Charles Hsu

Journal of Accounting and Economics, 2008, vol. 46, issue 2-3, 349-365

Abstract: Rules implemented by the U.S. Securities and Exchange Commission in 2003 impose additional disclosure and filing requirements on firms publicly disclosing non-GAAP earnings. We find the regulations produced (1) modest declines in the frequency of special- and other-item exclusions, (2) a decline in exclusion magnitude, (3) a modest decline in the probability disclosed earnings meet or beat forecasts, and (4) a decline in the association between returns and forecast errors. Our results suggest that, while the regulations reduced firms' use of non-GAAP disclosures to improve performance perceptions, they also reduced firms' willingness to use non-GAAP earnings to convey permanent earnings.

Keywords: Capital; markets; Regulation; Non-GAAP; earnings; Disclosure; Analysts'; forecasts (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:46:y:2008:i:2-3:p:349-365

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