Impression Management and Non-GAAP Reporting in Earnings Announcements
Encarna Guillamon Saorin
Universidad Carlos III de Madrid
ISCTE IUL Business School
Ana Cristina Marques
NOVA School of Business and Economics
January 12, 2012
CAAA Annual Conference 2012
This paper analyzes whether managers combine two mechanisms capable of influencing investors’ judgments in earnings announcements. Specifically, we study whether managers use impression management techniques to emphasize non-GAAP earnings measures when announcing annual results. The study is carried out on an international sample of European countries, during 2003-2005. The method used is manual content analysis. We find evidence that managers use impression management techniques as a complement to the disclosure of non-GAAP earnings measures. Furthermore, our analysis of market reactions indicates that although investors recognize that non-GAAP earnings measures have information content they penalize firms that present these figures in combination with impression management techniques. Thus, investors seem to perceive the use of impression management to enhance non-GAAP figures as an opportunistic strategy and consequently inflict a penalty for this self-serving behavior.
Number of Pages in PDF File: 42
Keywords: Non-GAAP earnings, impression management, pro forma, press releases
JEL Classification: M41
Date posted: January 13, 2012
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