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The impact of the SEC's regulation of non-GAAP disclosures

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  • Heflin, Frank
  • Hsu, Charles

Abstract

Rules implemented by the U.S. Securities and Exchange Commission in 2003 impose additional disclosure and filing requirements on firms publicly disclosing non-GAAP earnings. We find the regulations produced (1) modest declines in the frequency of special- and other-item exclusions, (2) a decline in exclusion magnitude, (3) a modest decline in the probability disclosed earnings meet or beat forecasts, and (4) a decline in the association between returns and forecast errors. Our results suggest that, while the regulations reduced firms' use of non-GAAP disclosures to improve performance perceptions, they also reduced firms' willingness to use non-GAAP earnings to convey permanent earnings.

Suggested Citation

  • Heflin, Frank & Hsu, Charles, 2008. "The impact of the SEC's regulation of non-GAAP disclosures," Journal of Accounting and Economics, Elsevier, vol. 46(2-3), pages 349-365, December.
    • Handle: RePEc:eee:jaecon:v:46:y:2008:i:2-3:p:349-365
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