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Dichev and Tang (2008) document a dramatic decrease over the last 40 years in the contemporaneous correlation between revenue and expense, along with an associated increase in earnings volatility and a decline in earnings persistence, suggesting a decline in earnings quality. We document that these changes are primarily attributable to an increase in the incidence of large special items. We then examine the extent to which this increase in special items is due to either more frequent real economic events related to special item recognition or to the adoption of new accounting standards. Our evidence suggests that changes in the frequency of economic events associated with special items have played a more important and sustained role relative to the role played by adoption of individual accounting standards. Finally, we find that the changing incidence of these economic events is at least in part related to the well-documented increase in competition in the U.S. economy over the last four decades.

This study examines the effect of product market competition on managerial disclosure of earnings forecasts using large reductions in U.S. import tariff rates to identify an exogenous increase in competition for domestic firms in U.S. product markets. Our difference-in-differences estimations show that tariff reductions are associated with a significant decrease in management forecasts of annual earnings by U.S. domestic firms. Further, this decrease is more pronounced when the tariff rate reduction triggers a greater increase in imports and when the forecasts are likely to incur higher proprietary costs. Our findings are consistent with competition from existing rivals reducing voluntary disclosure through increased proprietary costs.

This paper examines the joint effects of corporate governance and regulation by the Securities and Exchange Commission on the disclosure of manager-adjusted non-GAAP (or pro forma) earnings numbers in the United States. We provide evidence that prior to Regulation G investors were misled by disclosures of non-GAAP earnings, but only for disclosures made by firms with weaker corporate governance. After the SEC intervention there is no evidence that investors were still being misled. Furthermore, the effect of the intervention applied to both adjustments that are ex ante recurring as well as to adjustments that just meet or beat analysts' forecasts.