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Managerial reputation and Non-GAAP earnings disclosures

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Date Issued:
2014
Summary:
I examine how managerial reputation affects the quality of non-GAAP earnings disclosures and how the market reacts to non-GAAP earnings disclosures associated with managerial reputation. Although there was an initial dip in the frequency of non-GAAP earnings disclosures after SOX and Regulation G, the frequency of non-GAAP earnings disclosures has increased in recent years (Brown, Christensen, Elliott and Mergenthaler 2012). Motivated by the efficient contracting theory and managerial reputation incentives, I investigate whether reputable managers are associated with higher quality non-GAAP earnings disclosures. I also investigate whether the market is more responsive to non-GAAP earnings disclosed by reputable managers. Using empirical models modified from prior research, I find that reputable managers are less likely to disclose non-GAAP earnings, which is consistent with the efficient contracting explanation. I also find that reputable managers exclude more recurring items that are related to future operating earnings when they disclose non-GAAP earnings, which is consistent with the rent extraction explanation in prior research. Finally, I find that managerial reputation has an incremental effect on the market reaction and that the market is more responsive to non-GAAP earnings disclosed by reputable managers if the unexpected earnings are positive. The study contributes to both non-GAAP earnings disclosures literature and managerial reputation incentives literature. It also has implications for investors, managers, and regulators.
Title: Managerial reputation and Non-GAAP earnings disclosures.
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Name(s): Cheng, Yun, author
Kohlbeck, Mark, Thesis advisor
Florida Atlantic University, Degree grantor
College of Business
School of Accounting
Type of Resource: text
Genre: Electronic Thesis Or Dissertation
Date Created: 2014
Date Issued: 2014
Publisher: Florida Atlantic University
Place of Publication: Boca Raton, Fla.
Physical Form: application/pdf
Extent: 107 p.
Language(s): English
Summary: I examine how managerial reputation affects the quality of non-GAAP earnings disclosures and how the market reacts to non-GAAP earnings disclosures associated with managerial reputation. Although there was an initial dip in the frequency of non-GAAP earnings disclosures after SOX and Regulation G, the frequency of non-GAAP earnings disclosures has increased in recent years (Brown, Christensen, Elliott and Mergenthaler 2012). Motivated by the efficient contracting theory and managerial reputation incentives, I investigate whether reputable managers are associated with higher quality non-GAAP earnings disclosures. I also investigate whether the market is more responsive to non-GAAP earnings disclosed by reputable managers. Using empirical models modified from prior research, I find that reputable managers are less likely to disclose non-GAAP earnings, which is consistent with the efficient contracting explanation. I also find that reputable managers exclude more recurring items that are related to future operating earnings when they disclose non-GAAP earnings, which is consistent with the rent extraction explanation in prior research. Finally, I find that managerial reputation has an incremental effect on the market reaction and that the market is more responsive to non-GAAP earnings disclosed by reputable managers if the unexpected earnings are positive. The study contributes to both non-GAAP earnings disclosures literature and managerial reputation incentives literature. It also has implications for investors, managers, and regulators.
Identifier: FA00004185 (IID)
Degree granted: Dissertation (Ph.D.)--Florida Atlantic University, 2014.
Collection: FAU Electronic Theses and Dissertations Collection
Note(s): Includes bibliography.
Subject(s): Capital productivity -- Measurement
Disclosure in accounting
Industrial management
Investment analysis
Risk management
Held by: Florida Atlantic University Libraries
Sublocation: Digital Library
Links: http://purl.flvc.org/fau/fd/FA00004185
Persistent Link to This Record: http://purl.flvc.org/fau/fd/FA00004185
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Host Institution: FAU
Is Part of Series: Florida Atlantic University Digital Library Collections.