Disentangling Managers’ and Analysts’ Non-GAAP Reporting

51 Pages Posted: 28 May 2015 Last revised: 20 Jan 2018

See all articles by Jeremiah W. Bentley

Jeremiah W. Bentley

Isenberg School of Management, University of Massachusetts Amherst

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting; University of Georgia

Kurt H. Gee

Penn State; Financial Accounting Standards Board (FASB)

Benjamin C. Whipple

University of Georgia - C. Herman and Mary Virginia Terry College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2017

Abstract

Researchers frequently proxy for managers’ non-GAAP disclosures using performance metrics available through analyst forecast data providers (FDPs), such as I/B/E/S. The extent to which FDP data is a valid proxy for managers’ non-GAAP reporting, however, has been debated extensively. We explore this important question by creating the first large-sample dataset of managers’ non-GAAP earnings disclosures, which we directly compare to I/B/E/S data. Although we find a substantial overlap between the two datasets, we also find that they differ in systematic ways because I/B/E/S (1) excludes managers’ lower quality non-GAAP numbers and (2) sometimes provides higher quality non-GAAP measures that managers do not explicitly disclose. Our results indicate that using I/B/E/S to identify managers’ non-GAAP disclosures significantly underestimates the aggressiveness of their reporting choices. We encourage researchers interested in managers’ non-GAAP reporting to use our newly available dataset of manager-disclosed non-GAAP metrics because it more accurately captures managers’ reporting choices.

Keywords: Voluntary Disclosure, Non-GAAP Earnings, Analyst Forecasts

JEL Classification: M4

Suggested Citation

Bentley, Jeremiah W. and Christensen, Theodore E. and Gee, Kurt H. and Whipple, Benjamin C., Disentangling Managers’ and Analysts’ Non-GAAP Reporting (December 1, 2017). Available at SSRN: https://ssrn.com/abstract=2610995 or http://dx.doi.org/10.2139/ssrn.2610995

Jeremiah W. Bentley

Isenberg School of Management, University of Massachusetts Amherst ( email )

Department of Accounting
Amherst, MA 01003
United States

Theodore E. Christensen (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

University of Georgia ( email )

Athens, GA
United States

Kurt H. Gee

Penn State ( email )

201 Old Main
University Park
State College, PA 16802
United States

Financial Accounting Standards Board (FASB) ( email )

401 Merritt 7
P.O. Box 5116
Norwalk, CT 06856-5116
United States

Benjamin C. Whipple

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Brooks Hall
Athens, GA 30602-6254
United States

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