Non-GAAP earnings and executive compensation: An experiment

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

Prior literature suggests investors react to the presence, presentation and prominence of non-GAAP earnings. We extend this literature by considering how companies’ use of non-GAAP earnings affects investors’ judgments. Using an experiment, we manipulate the use of non-GAAP earnings to determine executive compensation. We find when non-GAAP earnings are used to determine executive compensation, investors assign a higher evaluation of corporate financial performance and invest significantly more capital. Contrary to prior literature, we find investors intentionally rely on non-GAAP earnings in their decision making. Combined, these findings suggest investors find non-GAAP earnings to be informative, rather than opportunistic
Original languageEnglish
Publication statusPublished - Jul 2019
EventAFAANZ 2019 Conference - QUT, Brisbane, Australia
Duration: 7 Jul 20199 Jul 2019
https://www.afaanz.org/past-conferences
http://www.afaanzconference.com/program

Conference

ConferenceAFAANZ 2019 Conference
CountryAustralia
CityBrisbane
Period7/07/199/07/19
Internet address

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Experiment
Executive compensation
Investors
Evaluation
Corporate financial performance
Decision making

Cite this

Brosnan, M., Duncan, K., Hasso, T., & Hollindale, J. (2019). Non-GAAP earnings and executive compensation: An experiment. Paper presented at AFAANZ 2019 Conference, Brisbane, Australia.
Brosnan, Mark ; Duncan, Keith ; Hasso, Tim ; Hollindale, Janice. / Non-GAAP earnings and executive compensation: An experiment. Paper presented at AFAANZ 2019 Conference, Brisbane, Australia.
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Brosnan, M, Duncan, K, Hasso, T & Hollindale, J 2019, 'Non-GAAP earnings and executive compensation: An experiment' Paper presented at AFAANZ 2019 Conference, Brisbane, Australia, 7/07/19 - 9/07/19, .

Non-GAAP earnings and executive compensation: An experiment. / Brosnan, Mark; Duncan, Keith; Hasso, Tim; Hollindale, Janice.

2019. Paper presented at AFAANZ 2019 Conference, Brisbane, Australia.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Non-GAAP earnings and executive compensation: An experiment

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AU - Hasso, Tim

AU - Hollindale, Janice

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N2 - Prior literature suggests investors react to the presence, presentation and prominence of non-GAAP earnings. We extend this literature by considering how companies’ use of non-GAAP earnings affects investors’ judgments. Using an experiment, we manipulate the use of non-GAAP earnings to determine executive compensation. We find when non-GAAP earnings are used to determine executive compensation, investors assign a higher evaluation of corporate financial performance and invest significantly more capital. Contrary to prior literature, we find investors intentionally rely on non-GAAP earnings in their decision making. Combined, these findings suggest investors find non-GAAP earnings to be informative, rather than opportunistic

AB - Prior literature suggests investors react to the presence, presentation and prominence of non-GAAP earnings. We extend this literature by considering how companies’ use of non-GAAP earnings affects investors’ judgments. Using an experiment, we manipulate the use of non-GAAP earnings to determine executive compensation. We find when non-GAAP earnings are used to determine executive compensation, investors assign a higher evaluation of corporate financial performance and invest significantly more capital. Contrary to prior literature, we find investors intentionally rely on non-GAAP earnings in their decision making. Combined, these findings suggest investors find non-GAAP earnings to be informative, rather than opportunistic

M3 - Paper

ER -

Brosnan M, Duncan K, Hasso T, Hollindale J. Non-GAAP earnings and executive compensation: An experiment. 2019. Paper presented at AFAANZ 2019 Conference, Brisbane, Australia.