Non-GAAP earnings and executive compensation: An experiment

Mark Brosnan; Keith Duncan; Tim Hasso; Janice Hollindale

Non-GAAP earnings and executive compensation: An experiment

Mark Brosnan, Keith Duncan, Tim Hasso, Janice Hollindale

Bond Business School

Research output: Contribution to conference › Paper › Research › peer-review

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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 language	English
Publication status	Unpublished - Jul 2019
Event	AFAANZ 2019 Conference - QUT, Brisbane, Australia Duration: 7 Jul 2019 → 9 Jul 2019 https://www.afaanz.org/past-conferences http://www.afaanzconference.com/program

Conference

Conference	AFAANZ 2019 Conference
Country/Territory	Australia
City	Brisbane
Period	7/07/19 → 9/07/19
Internet address	https://www.afaanz.org/past-conferences http://www.afaanzconference.com/program

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1 Article

Non-GAAP earnings and executive compensation: An experiment
Brosnan, M., Duncan, K., Hasso, T. & Hollindale, J., 27 Apr 2023, In: Accounting and Finance (ONLINE). p. 1-24 24 p.
Research output: Contribution to journal › Article › Research › peer-review

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Cite this

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title = "Non-GAAP earnings and executive compensation: An experiment",

abstract = "Prior literature suggests investors react to the presence, presentation and prominence of non-GAAP earnings. We extend this literature by considering how companies{\textquoteright} use of non-GAAP earnings affects investors{\textquoteright} 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",

author = "Mark Brosnan and Keith Duncan and Tim Hasso and Janice Hollindale",

year = "2019",

month = jul,

language = "English",

note = "AFAANZ 2019 Conference ; Conference date: 07-07-2019 Through 09-07-2019",

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TY - CONF

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

AU - Brosnan, Mark

AU - Duncan, Keith

AU - Hasso, Tim

AU - Hollindale, Janice

PY - 2019/7

Y1 - 2019/7

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

T2 - AFAANZ 2019 Conference

Y2 - 7 July 2019 through 9 July 2019

ER -

Non-GAAP earnings and executive compensation: An experiment

Abstract

Conference

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Non-GAAP earnings and executive compensation: An experiment

Cite this