Non-GAAP earnings and executive compensation: An experiment

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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 statusUnpublished - Jul 2019
EventAFAANZ 2019 Conference - QUT, Brisbane, Australia
Duration: 7 Jul 20199 Jul 2019


ConferenceAFAANZ 2019 Conference
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