The Effect of Voluntary Clawback Adoption on Non-GAAP Reporting
Forthcoming in Journal of Accounting and Economics
63 Pages Posted: 16 Jun 2013 Last revised: 28 Sep 2018
Date Written: September 19, 2018
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: Dodd-Frank Act, Clawback, Non-GAAP, Pro forma, Voluntary Disclosure
JEL Classification: G30, L50, M41
Suggested Citation: Suggested Citation