The Informativeness of Non-GAAP Earnings: Empirical Evidence on China

Abstract

In 2019, China piloted the Science and Technology Innovation Board (STIB) to test the practicability of a registration-based system with information disclosure requirements different from those of the approval-based system widely used. Using empirical data, the relationship between the informativeness (measured by earnings persistence and value relevance) of non-GAAP performance measures (core earnings and non-recurring gains and losses), of companies listed in the STIB was explored. The main findings are both measures capture earnings persistence, and core earnings are value-relevant; the sign of the performance measure influences informativeness; the informativeness of non-recurring profits and losses improves after setting the board.