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Analyst Non-Gaap Reporting: When Do Equity Analysts Adjust Gaap Earnings – An Application Of Text Based Firm Complexity, Patrick Chen
Analyst Non-Gaap Reporting: When Do Equity Analysts Adjust Gaap Earnings – An Application Of Text Based Firm Complexity, Patrick Chen
CMC Senior Theses
Equity analysts adjust GAAP earnings to report non-GAAP figures that they believe better represent a firm’s current and future performance. The importance of such non-GAAP(street) figures has been determined and accepted by the literature, but the process in which analysts arrive at such figures is less understood. I apply a newly defined measure of firm complexity using text based analysis of firm annual reports and investigate its effect. When complexity increases, it becomes harder to individuate different components of a system. When that system is a firm, complexity then increases the difficulty in determining an accurate measure of performance. The …