Input Price Shocks and Investment: Evidence from OEMs

Tomy, Rimmy E.

doi:10.2139/ssrn.3294451

SSRN Journal

2018

DOI: 10.2139/ssrn.3294451

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Input Price Shocks and Investment: Evidence from OEMs

Rimmy E. Tomy

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2024

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Cited by 1 publication

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Non-GAAP Reporting and Investment

McClure,

Zakolyukina

2024

The Accounting Review

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The wide-spread reporting of non-GAAP earnings suggests efficiency gains from doing so. By estimating a dynamic investment model, we examine the real implications of investors using both GAAP and non-GAAP earnings to value firms. When investors use the firm’s GAAP earnings only, the firm’s manager—who cares about current stock prices—underinvests, and his investment is sensitive to transitory earnings. Non-GAAP earnings can improve investment efficiency by adjusting for these transitory earnings, but can also hide inefficient investment by introducing opportunistic bias. Although non-GAAP earnings induce overinvestment, they dominate GAAP-only reporting. Counterfactual analysis reveals supplementing GAAP earnings with biased non-GAAP earnings increases firm value by 3.4 percent relative to GAAP-only reporting. Precluding bias reduces overinvestment and further increases firm value by 1 percent. Data Availability: Data are available from the sources cited in the text. JEL Classifications: E22; G31; G34; M40.

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Non-GAAP Reporting and Investment

McClure,

Zakolyukina

2024

The Accounting Review

View full text Add to dashboard Cite

show abstract

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Input Price Shocks and Investment: Evidence from OEMs

Cited by 1 publication

References 61 publications

Non-GAAP Reporting and Investment

Non-GAAP Reporting and Investment

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