Investor Connections and Non-GAAP Reporting

• In Event: Doctoral Student Faculty Interchange I

Abstract

I investigate the association of social networks with manager decisions with respect to the use of non-GAAP reporting in disseminating information to investors. While both social connections and non-GAAP reporting can be used to reduce information asymmetry between firms and investors, it is unclear how social connections with investors can impact management’s decision to disclose non-GAAP information. Using BoardEx data from 1999 to 2015, I compute social connections with investors using the size/degree centrality measure of social networks. I find that the likelihood non-GAAP reporting is positively associated with my three measures of social connections with investors. I attribute these results to managers using social connections with investors as a mechanism to build trust in management and reduce skepticism over non-GAAP reporting.
Key

Authors

• Suzanne Mullinnix, AAA

• Chad Harwood, Florida Atlantic University - Boca