The Impact of Media Attention on the Use of Alternative Earnings Measures

39 Pages Posted: 27 Nov 2007

See all articles by Miriam Koning

Miriam Koning

Erasmus University Rotterdam (EUR) - Financial Management

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Gerard Mertens

Erasmus University Rotterdam (EUR) - Department of Financial Management

Multiple version iconThere are 2 versions of this paper

Date Written: October 25, 2007

Abstract

The practice of reporting earnings measures that deviate from generally accepted accounting principles (non-GAAP measures) has received negative attention in the media. Regulators argue in favour of reporting GAAP earnings measures and utter their concerns that investors may be misled by the use of non-GAAP measures. In a period of increased regulatory concern for these reporting practices, we explore whether there has been a shift away from the use of non-GAAP metrics. We analyse a sample of earnings press releases in the period 1999-2004 from companies listed at Euronext Amsterdam. Our findings indicate that reporting non-GAAP measures is a common practice and that the frequency of reporting non-GAAP earnings measures has increased despite the concerns voiced by regulators. On the other hand, investors seem to have become more hesitant towards the use of alternative earnings measures for their decision-making. Our findings suggest that investors find non-GAAP measures informative before 2003, but they turn away from these measures in the following years and price GAAP earnings metrics instead. Together, these findings suggest that the negative media attention for non-GAAP measures has influenced the perception of investors, but not of managers.

Keywords: Regulation, Event study, Non-GAAP earnings, Information content, Value relevance

Suggested Citation

Koning, Miriam and Roosenboom, Peter and Mertens, Gerard, The Impact of Media Attention on the Use of Alternative Earnings Measures (October 25, 2007). ERIM Report Series Reference No. ERS-2007-073-F&A, Available at SSRN: https://ssrn.com/abstract=1032749

Miriam Koning (Contact Author)

Erasmus University Rotterdam (EUR) - Financial Management ( email )

United States

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Gerard Mertens

Erasmus University Rotterdam (EUR) - Department of Financial Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2556 (Phone)
+31 10 408 9017 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
105
Abstract Views
1,794
rank
301,293
PlumX Metrics