An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Ana C Marques
University of Texas At Austin

Abstract: This paper studies the association between corporate governance and the disclosure of non-GAAP earnings in quarterly earnings announcements. This is accomplished using hand-collected data on the disclosure of non-GAAP financial measures by the S&P500 firms from 2001 to 2003. Results reveal the decrease in probability of disclosure of non-GAAP earnings was lower in firms with more independent members of the board and higher level of institutional ownership. Furthermore, a higher concentration of institutional investors that are potentially active in monitoring the firms is associated with a lower probability of disclosure of non-GAAP earnings. Additional analysis indicates that both a high level of outside directors and a high level of institutional ownership are associated with a lower valuation of non-GAAP earnings and that a high concentration of institutional investors that are potentially active in monitoring is associated with a lower valuation of non-GAAP earnings.

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