Disentangling Managers’ and Analysts’ Non‐GAAP Reporting

Posted: 6 Oct 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: September 1, 2018

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‐provided earnings are a valid proxy for managers’ non‐GAAP reporting, however, has been debated extensively. We explore this important question by creating the first large‐sample data set 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 data sets, 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 data set of manager‐disclosed non‐GAAP metrics because it more accurately captures managers’ reporting choices.

Keywords: non-GAAP earnings; financial analysts; voluntary disclosure;earnings announcements; reporting quality

JEL Classification: M40; M41; M48

Suggested Citation

Bentley, Jeremiah W. and Christensen, Theodore E. and Gee, Kurt H. and Whipple, Benjamin C., Disentangling Managers’ and Analysts’ Non‐GAAP Reporting (September 1, 2018). Journal of Accounting Research, Vol. 56, No. 4, 2018. Available at SSRN: https://ssrn.com/abstract=3249067

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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