Impression Management and Non-GAAP Disclosure in Earnings Announcements

• In Event: Management Forecasts

Abstract

We study the disclosure of non-GAAP earnings combined with impression management techniques in earnings announcement press releases. We find that managers who exclude recurring earnings components from their self-constructed non-GAAP earnings figures use higher impression management in earnings press releases. This finding is consistent with the strategic use of impression management to hide the persistence of non-GAAP adjustments, and consequently to overstate the persistence of non-GAAP earnings. Our market reaction tests indicate that both investors and financial analysts are able to identify managers’ intentions and react negatively to the disclosure of non-GAAP information that is combined with high impression management.

Authors

• Encarna Guillamon Saorin, Universidad Carlos III

• Helena Isidro, ISCTE

• Ana Cristina Marques, Nova School of Business and Economics