Abstract
We examine the influence of investor sentiment on managers' discretionary disclosure of "pro forma" (adjusted) earnings metrics in earnings press releases. We find that managers' propensity to disclose an adjusted earnings metric (especially one that exceeds the GAAP earnings number) increases with the level of investor sentiment. Furthermore, our analyses suggest that, as investor sentiment increases, managers: (1) exclude higher levels of both recurring and nonrecurring expenses in calculating the pro forma earnings number and (2) emphasize the pro forma figure by placing it more prominently within the earnings press release. Additional analyses indicate that the association between investor sentiment and managers' pro forma disclosure decisions at least partly reflects opportunistic motives. Finally, we find that managers' own sentiment-driven expectations also play a role in their pro forma disclosure decisions.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1-40 |
| Number of pages | 40 |
| Journal | Journal of Accounting Research |
| Volume | 50 |
| Issue number | 1 |
| DOIs | |
| State | Published - Mar 1 2012 |
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ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
Cite this
Investor sentiment and pro forma earnings disclosures. / Brown, Nerissa C.; Christensen, Theodore E.; Elliott, W. Brooke; Mergenthaler, Richard D.
In: Journal of Accounting Research, Vol. 50, No. 1, 01.03.2012, p. 1-40.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Investor sentiment and pro forma earnings disclosures
AU - Brown, Nerissa C.
AU - Christensen, Theodore E.
AU - Elliott, W. Brooke
AU - Mergenthaler, Richard D.
PY - 2012/3/1
Y1 - 2012/3/1
N2 - We examine the influence of investor sentiment on managers' discretionary disclosure of "pro forma" (adjusted) earnings metrics in earnings press releases. We find that managers' propensity to disclose an adjusted earnings metric (especially one that exceeds the GAAP earnings number) increases with the level of investor sentiment. Furthermore, our analyses suggest that, as investor sentiment increases, managers: (1) exclude higher levels of both recurring and nonrecurring expenses in calculating the pro forma earnings number and (2) emphasize the pro forma figure by placing it more prominently within the earnings press release. Additional analyses indicate that the association between investor sentiment and managers' pro forma disclosure decisions at least partly reflects opportunistic motives. Finally, we find that managers' own sentiment-driven expectations also play a role in their pro forma disclosure decisions.
AB - We examine the influence of investor sentiment on managers' discretionary disclosure of "pro forma" (adjusted) earnings metrics in earnings press releases. We find that managers' propensity to disclose an adjusted earnings metric (especially one that exceeds the GAAP earnings number) increases with the level of investor sentiment. Furthermore, our analyses suggest that, as investor sentiment increases, managers: (1) exclude higher levels of both recurring and nonrecurring expenses in calculating the pro forma earnings number and (2) emphasize the pro forma figure by placing it more prominently within the earnings press release. Additional analyses indicate that the association between investor sentiment and managers' pro forma disclosure decisions at least partly reflects opportunistic motives. Finally, we find that managers' own sentiment-driven expectations also play a role in their pro forma disclosure decisions.
UR - http://www.scopus.com/inward/record.url?scp=84855873716&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84855873716&partnerID=8YFLogxK
U2 - 10.1111/j.1475-679X.2011.00427.x
DO - 10.1111/j.1475-679X.2011.00427.x
M3 - Article
AN - SCOPUS:84855873716
VL - 50
SP - 1
EP - 40
JO - Journal of Accounting Research
JF - Journal of Accounting Research
SN - 0021-8456
IS - 1
ER -