<scp>Non‐GAAP</scp> earnings and executive compensation: An experiment

Brosnan, Mark; Duncan, Keith; Hasso, Tim; Hollindale, Janice

doi:10.1111/acfi.13098

Cited by 3 publications

(1 citation statement)

References 95 publications

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“…A different approach is required. For example, a working paper by Brosnan et al. (2023) takes an experimental approach and finds management's disclosure of their use of non-GAAP earnings to determine executive remuneration can affect investor judgments.…”

Section: Emerging Research Themesmentioning

confidence: 99%

Happy 20-year anniversary non-GAAP earnings: a systematic review of the literature

Brosnan,

Duncan,

Hasso

et al. 2023

JAL

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PurposeIt has been two decades since the first academic paper shone a spotlight on non-GAAP earnings. The past 20 years of research investigates concerns over the misuse of these disclosures and resulted in some significant changes to accounting and reporting standards across the globe. This paper aims to document the history of non-GAAP reporting and outline the emerging themes of the now matured practice of non-GAAP reporting.Design/methodology/approachThis systematic literature review searches two popular databases to identify the academic publications relating to non-GAAP reporting between 2002 and 2022. The paper uses bibliographic mapping to present the key statistics of the non-GAAP reporting field of research.FindingsThe non-GAAP reporting environment started out as the “wild West’ but, through regulation and public awareness, emerged as an important supplement to the traditional outputs of financial reporting. Current consensus is recent non-GAAP earnings are informative to users but there is lack of research into qualitative non-GAAP disclosures and the vast body of archival research needs triangulating with more experimental studies.Originality/valueThis paper contributes to the literature by documenting the past 20 years of non-GAAP reporting and identifying the important existing and emerging research areas concerning non-GAAP earnings disclosures.

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Section: Emerging Research Themesmentioning

confidence: 99%

Happy 20-year anniversary non-GAAP earnings: a systematic review of the literature

Brosnan,

Duncan,

Hasso

et al. 2023

JAL

Self Cite

View full text Add to dashboard Cite

show abstract

Research ideas matter: Guidance for research students and early career researchers

Duncan,

Gepp,

Craig

et al. 2023

Pacific-Basin Finance Journal

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The details matter: SEC regulatory guidance and informativeness in non-GAAP disclosure decisions

Desai,

Davern

2024

MEDAR

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Purpose This paper aims to examine how managers make non-generally accepted accounting principles (GAAP) exclusion decisions depending on the regulatory guidance provided and their motivations. Guidance detail is a double-edged sword: resolving uncertainty but risking rule-based compliance over principled judgment. Design/methodology/approach This paper uses the context of non-GAAP measures in reporting, given the history of Securities and Exchange Commission changes in guidance detail. Drawing on theories of epistemic motivation and process accountability, this paper manipulates the goal of management (informativeness vs. opportunism) and guidance detail to examine effects on management decisions to exclude an ambiguous charge. Findings The 2×2 between participants experiment with 132 managers reveals that more detailed guidance increases likelihood of exclusion of an ambiguous charge. This paper further finds that this exclusion is more likely when management is given an informativeness goal, a result of a mediating effect of epistemic motivation. However, these findings only hold at low levels of process accountability. Practical implications The findings regarding the psychological concepts recognize the influence of perceived decision uncertainty by suggesting how managers respond to the level of regulatory guidance detail, offering regulators and auditors a basis for understanding and anticipating managerial reporting choices. Also, awareness of heightened epistemic motivation under the informativeness goal provides a nuanced practical understanding of non-GAAP decision drivers. Finally, the finding that effects are more pronounced for managers with lower process accountability highlights the significance of organizational accountability structures in guiding managerial choices, which can inform board-level governance and control decisions. Originality/value Pragmatically, this paper finds that detailed guidance leads to more appropriate exclusion decisions under a goal of informativeness but finds no such evidence where the goal is opportunism. No prior study has examined how the level of detail in guidance affects managers’ disclosure choices.

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Non‐GAAP earnings and executive compensation: An experiment

Cited by 3 publications

References 95 publications

Happy 20-year anniversary non-GAAP earnings: a systematic review of the literature

Happy 20-year anniversary non-GAAP earnings: a systematic review of the literature

Research ideas matter: Guidance for research students and early career researchers

The details matter: SEC regulatory guidance and informativeness in non-GAAP disclosure decisions

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