TY - JOUR
T1 - Relative Emphasis on Non-GAAP Earnings in Conference Calls
T2 - Determinants and Market Reaction
AU - Henry, Elaine
AU - Hu, Nan
AU - Jiang, Xi
N1 - Publisher Copyright:
© 2020, © 2020 European Accounting Association.
PY - 2020/1/1
Y1 - 2020/1/1
N2 - We use textual analysis to examine whether non-GAAP earnings receive greater emphasis than GAAP earnings in the conference calls that accompany earnings announcements. We measure relative emphasis, i.e. prominence, based on the first appearance or frequency of GAAP and non-GAAP earnings per share (EPS) dollar amounts in the transcripts of conference calls. To complement our analysis of relative emphasis on non-GAAP earnings, we measure general non-GAAP content using frequency counts of keywords. We find that firms place greater relative emphasis on non-GAAP earnings and include more general non-GAAP content when the non-GAAP results exceed the GAAP results, when the non-GAAP results achieve a benchmark that the GAAP results missed, and when the firm’s GAAP earnings are less value-relevant. We find somewhat weak evidence that impression-management motivation is the dominant explanation for greater relative emphasis on non-GAAP earnings but not for general non-GAAP content. Overall, the construct and measurement of relative emphasis on non-GAAP earnings and general non-GAAP content differ, but results indicate they are complements in explaining the market response to earnings conference calls.
AB - We use textual analysis to examine whether non-GAAP earnings receive greater emphasis than GAAP earnings in the conference calls that accompany earnings announcements. We measure relative emphasis, i.e. prominence, based on the first appearance or frequency of GAAP and non-GAAP earnings per share (EPS) dollar amounts in the transcripts of conference calls. To complement our analysis of relative emphasis on non-GAAP earnings, we measure general non-GAAP content using frequency counts of keywords. We find that firms place greater relative emphasis on non-GAAP earnings and include more general non-GAAP content when the non-GAAP results exceed the GAAP results, when the non-GAAP results achieve a benchmark that the GAAP results missed, and when the firm’s GAAP earnings are less value-relevant. We find somewhat weak evidence that impression-management motivation is the dominant explanation for greater relative emphasis on non-GAAP earnings but not for general non-GAAP content. Overall, the construct and measurement of relative emphasis on non-GAAP earnings and general non-GAAP content differ, but results indicate they are complements in explaining the market response to earnings conference calls.
KW - Conference calls
KW - Disclosure emphasis
KW - Non-GAAP
KW - Text mining
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U2 - 10.1080/09638180.2019.1664312
DO - 10.1080/09638180.2019.1664312
M3 - Article
AN - SCOPUS:85078497802
SN - 0963-8180
VL - 29
SP - 169
EP - 197
JO - European Accounting Review
JF - European Accounting Review
IS - 1
ER -