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Non-Gaap Earnings And Stock Price Crash Risk, Charles Hsu, Rencheng Wang, Benjamin C. Whipple
Non-Gaap Earnings And Stock Price Crash Risk, Charles Hsu, Rencheng Wang, Benjamin C. Whipple
Research Collection School Of Accountancy
We investigate whether non-GAAP earnings disclosures increase stock price crash risk. Consistent with non-GAAP disclosures allowing managers to inflate investors’ perceptions about firm performance, our results indicate that income increasing non-GAAP reporting increases crash risk. We also find that managers can use non-GAAP reporting as a substitute for earnings management to withhold bad news from investors (the traditional explanation for crashes). Finally, we find a positive association between non-GAAP reporting and the likelihood of subsequent events that can trigger a crash. Overall, our evidence is consistent with some non-GAAP disclosures exposing investors to risks of large and sudden price declines.
Terrorist Attacks, Managerial Sentiment, And Corporate Disclosures, Wen Chen, Haibin Wu, Liandong Zhang
Terrorist Attacks, Managerial Sentiment, And Corporate Disclosures, Wen Chen, Haibin Wu, Liandong Zhang
Research Collection School Of Accountancy
This study investigates the effect of managerial sentiment on corporate disclosure decisions. Using terrorist attacks in the United States as adverse shocks to managerial sentiment, we find that firms located in the metropolitan areas attacked issue more negatively biased earnings forecasts. The effect is stronger for firms with higher operating uncertainty and firms with younger, inexperienced, or less confident executives and it is weaker for firms located in states with increasing violent crime rates. A potential alternative explanation is that managers could strategically bias earnings forecasts downward and attribute the poor performance to terrorist attacks. To address this issue, we …