The effect of voluntary clawback adoption on non-GAAP reporting

Hangsoo Kyung, Hakyin Lee and Carol Marquardt

Journal of Accounting and Economics, 2019, vol. 67, issue 1, 175-201

Abstract: We examine the effect of voluntary adoption of clawback provisions on non-GAAP earnings disclosures. Prior literature documents that voluntary clawback adoption improves financial reporting quality by increasing the costs of misstating GAAP earnings. However, managers may respond to perceptions of reduced discretion over GAAP reporting by increasing their reliance on non-GAAP earnings disclosures. Using a propensity score matched sample, we find that non-GAAP earnings disclosure frequency increases and non-GAAP exclusion quality decreases after clawback adoption, consistent with a more opportunistic use of non-GAAP reporting. Additional cross-sectional tests help support this interpretation.

Keywords: Clawbacks; Corporate governance; Non-GAAP earnings; Earnings quality; Dodd-Frank (search for similar items in EconPapers)
JEL-codes: G38 M41 M48 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:67:y:2019:i:1:p:175-201

DOI: 10.1016/j.jacceco.2018.09.002

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