CEO educational backgrounds and non-GAAP earnings disclosures
-
DOIhttp://dx.doi.org/10.21511/imfi.19(3).2022.14
-
Article InfoVolume 19 2022, Issue #3, pp. 167-175
- Cited by
- 402 Views
-
174 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Non-GAAP earnings have received attention recently. Existing literature suggests CEOs’ educational backgrounds affect the financial reporting quality. Thus, the paper analyzes whether the educational background of CEOs affects the disclosure of non-GAAP earnings. Using logit regression to examine the probability of non-GAAP earnings disclosures, this study finds the coefficient value of MBA is 0.4171, which suggests that CEOs with an MBA degree are more likely to disclose non-GAAP earnings than other CEOs. In addition, the moderating effect of audit committee quality on the association between CEO educational backgrounds and non-GAAP earnings disclosures is investigated. The coefficient value of MBA×ACC_QUA is –2.809, which suggests that audit committee quality negatively moderates a positive association between MBA-holding CEOs and non-GAAP earnings disclosures. By focusing on a company’s non-GAAP earnings, this study contributes to the financial reporting literature. The results provide evidence that CEO education backgrounds and audit committee quality influence firms’ non-GAAP earnings disclosures.
Acknowledgment
The author acknowledges the financial support of the National Science and Technology Council, R.O.C. (Award number MOST 111-2410-H-035-048-).
- Keywords
-
JEL Classification (Paper profile tab)M12, M41, G34
-
References40
-
Tables6
-
Figures0
-
- Table 1. Descriptive statistics
- Table 2. Distribution of the sample by industry
- Table 3. Distribution of the sample by year
- Table 4. Correlation analysis
- Table 5. The relationship between MBA-holding CEOs and non-GAAP earnings disclosures
- Table 6. The moderating effect of audit committee quality on the relationship between MBA-holding CEOs and non-GAAP earnings disclosures
-
- Allee, D. K., Bhattacharya, N., Black, E. L., & Christensen, T. E. (2007). Pro forma disclosure and investor sophistication: External validation of experimental evidence using archival data. Accounting, Organizations and Society, 32, 201-222.
- Ashbaugh-Skaife, H., Collins, D., & LaFond, R. (2006). The effects of corporate governance on firms’ credit ratings. Journal of Accounting and Economics, 42, 203-243.
- Bamber, L. S., Jiang, J. X., & Wang, I. Y. (2010). What’s my style? The influence of top managers on voluntary corporate financial disclosure. Accounting Review, 85(4), 1131-1162.
- Bansal, N., Seetharaman, A., & Wang, F. (2013). Managerial risk-taking incentives and non-GAAP arnings disclosures. Journal of Contemporary Accounting and Economics, 9(1), 100-121.
- Baumker, M., Biggs, P., McVay, S. E., & Pierce, J. (2014). The disclosure of non-GAAP earnings following regulation G: An analysis of transitory gains. Accounting Horizons, 28(1), 77-92.
- Bertrand, M., & Schoar, A. (2003). Managing with style: the effect of managers on firm policies. Quarterly Journal of Economics, 118(4), 1169-1208.
- Bhattacharya, N., Black, E. L., Christensen, T. E., & Larson, C. R. (2003). Assessing the relative informativeness and permanence of pro forma earnings and GAAP operating earnings. Journal of Accounting and Economics, 36(1/3), 285-319.
- Bhattacharya, N., Black, E. L., Christensen, T. E., & Mergenthaler, R. D. (2007). Who trades on pro forma earnings information? Accounting Review, 82, 581-619.
- Black, D. E., & Christensen, T. E. (2009). US managers’ use of ‘pro Forma’ Adjustments to meet trategic earnings targets. Journal of Business Finance & Accounting, 36(3/4), 297-326.
- Black, E. L., Christensen, T. E., Kiosse, P. V., & Steffen, T. D. (2017). Has the regulation of Non-GAAP disclosures influenced managers’ use of aggressive earnings exclusions? Journal of Accounting, Auditing & Finance, 32(2), 209-240.
- Bowen, R., Davis, A., & Matsumoto, D. (2005). Emphasis on Pro Forma versus GAAP Earnings in Quarterly Press Releases: Determinants, SEC Intervention, and Market Reactions. The Accounting Review, 80(4), 1011-1038.
- Bradshaw, M. T., & Sloan, R. G. (2002). GAAP versus the street: An empirical assessment of two alternative definitions of earnings. Journal of Accounting Research, 40, 41-66.
- Brown, L. D., & Sivakumar, K. (2003). Comparing the value relevance of two operating income measures. Review of Accounting Studies, 8(4), 561-572.
- Brown, N. C., Christensen, T. E., & Elliott, W. B. (2012). The timing of quarterly ‘‘pro forma’’ earnings announcements. Journal of Business Finance & Accounting, 39, 315-359.
- Bruce, B., & Bradshaw, M. (2004). Analysts, Lies, and Statistics: Cutting through the Hype in Corporate Earnings Announcements. 1st edition. New York, NY: Institutional Investor Books.
- Choi, Y. S., Lin, S., Walker, M., & Young, S. E. (2007). Disagreement over the persistence of earnings components: Evidence on the properties of management-specific adjustments to GAAP earnings. Review of Accounting Studies, 12, 595-622.
- Christensen, T. E., Drake, M. S., & Thornock, J. R. (2014). Optimistic reporting and pessimistic investing: Do pro forma earnings disclosures attract short sellers? Contemporary Accounting Research, 31, 67-102.
- Curtis, A., McVay, S., & Whipple, B. (2014). Non-GAAP earnings: Informative or opportunistic? An analysis of transitory gains. The Accounting Review, 89, 933-958.
- Delmas, M. A., & Toffel, M. W. (2008). Organizational responses to environmental demands: opening the black box. Strategic Management Journal, 29(10), 1027-1055.
- Doyle, J. T., Jennings, J., & Soliman, M. T. (2013). Do managers define non-GAAP earnings to meet or beat analyst forecasts? Journal of Accounting and Economics, 56(1), 40-56.
- Doyle, J., Lundholm, R., & Soliman, M. (2003). The predictive value of expenses excluded from pro forma earnings. Review of Accounting Studies, 8(2/3), 145-174.
- Eng, L., & Mak, Y. (2003). Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy, 22, 325-345.
- Entwistle, G. M., Feltham, G. D., & Mbagwu, C. (2006). Financial reporting regulation and the reporting of pro forma earnings. Accounting Horizons, 20(1), 39-55.
- Finkelstein, S., Hambrick, D. C., & Cannella, A. (2009). Strategic leadership: Theory and research on executives, Top management teams, and boards. Oxford University Press: New York.
- Frankel, R., McVay, S., & Soliman, M. (2011). Non-GAAP earnings and board independence. Review of Accounting Studies, 16(4), 719-744.
- Frederickson, J. R., & Miller, J. S. (2004). The effects of pro forma earnings disclosures on analysts’ and nonprofessional investors’ equity valuation judgments. The Accounting Review, 79, 667-686.
- Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: evidence from the field. Journal of Financial Economics, 60(2/3), 187-243.
- Graham, J. R., Harvey, C. R., & Rajgopal, S. (2005). The economic implications of corporate financial reporting. Journal of Accounting and Economics, 40(1/3), 3-73.
- Guillamon-Saorin, E., Isidro, H., & Marques, A. C. (2017). Impression management and non-GAAP reporting in earnings announcements. Journal of Business Finance & Accounting, 44(3/4), 448-479.
- Heflin, F. L., & Hsu, C. (2008). The impact of the SEC’s regulation of non-GAAP disclosures. Journal of Accounting & Economics, 46, 349-365.
- Isidro, H., & Marques, A. (2013). The Effects of Compensation and Board Quality on Non-GAAP Disclosures in Europe. The International Journal of Accounting, 48(3), 289-317.
- Isidro, H., & Marques, A. (2015). The role of institutional and economic forces in the strategic use of non-GAAP disclosures to beat earnings benchmarks. European Accounting Review, 24, 95-128.
- Krishnan, J. (2005). Audit Committee Quality and Internal Control: An Empirical Analysis. The Accounting Review, 80(2), 649-675.
- Lewis, B. W., Walls, J. L., & Dowell, G. W. (2014). ‘Difference in degrees: CEO characteristics and firm environmental disclosure’. Strategic Management Journal, 35, 712-722.
- Lougee, B. A., & Marquardt, C. A. (2004). Earnings informativeness and strategic disclosure: An empirical examination of ‘‘pro forma’’ earnings. The Accounting Review, 79, 769-795.
- Marques, A. (2006). SEC interventions and the frequency and usefulness of non-GAAP financial measures. Review of Accounting Studies, 11(4), 549-574.
- Schadewitz, H., & Blevins, D. (1998). Major determinants of interim disclosures in an emerging market. American Business Review, 16(1), 41-55.
- Securities and Exchange Commission (SEC). (2003). Final Rule: Conditions for Use of Non-GAAP Financial Measures (Release No. 33-8176).
- Seetharaman, A., Wang, X., & Zhang, S. (2014). An empirical analysis of the effects of Accounting expertise in audit committees on Non-GAAP earnings exclusions. Accounting Horizons, 28(1), 17-37.
- Warner, J. (2006). Earnings: To guide or not to guide. Directorship (July/August), 22-23.