Non-GAAP Images, Press Release Prominence, and Investors’ Reliance on Non-GAAP Earnings

Nerissa C. Brown, W. Brooke Elliott, Stephanie M. Grant

Research output: Working paper

Abstract

Firms are increasingly disseminating images on social media that prominently display customized measures of the firm’s earnings performance (labeled as “non-GAAP images”). This disclosure practice falls outside the scope of existing authoritative guidance on the prominence of non-GAAP financial metrics in earnings releases and other SEC filings. Using an experimental design, we isolate this unexplored regulatory gap and investigate how non-GAAP earnings metrics disseminated via an image on social media and presented prominently in a hyperlinked earnings release interact to influence investors’ reliance on non-GAAP earnings. The results from our primary experiment indicates that nonprofessional investors fixate less on the non-GAAP metric when GAAP earnings is presented more prominently in the earnings release in line with SEC rules. However, when the firm disseminates an image tweet featuring the non-GAAP figure, nonprofessional investors rely more on the non-GAAP metric even when the earnings press release features the GAAP metric more prominently. Additional results from supplemental experiments confirm that background imagery operates as a distinctively unique prominence tool that differentially influences investor judgments compared to traditional text-based prominence.
Original languageEnglish (US)
Pages42
DOIs
StatePublished - Jan 27 2018

Fingerprint

Press releases
Investors
Nonprofessional investors
Experiment
Social media
Guidance
Disclosure
Experimental design
Imagery

Keywords

  • Non-GAAP Earnings
  • Image
  • Social Media
  • Twitter
  • Investment Decisions

Cite this

@techreport{e2fa87adc9c64050b7b81313d9ee2803,
title = "Non-GAAP Images, Press Release Prominence, and Investors’ Reliance on Non-GAAP Earnings",
abstract = "Firms are increasingly disseminating images on social media that prominently display customized measures of the firm’s earnings performance (labeled as “non-GAAP images”). This disclosure practice falls outside the scope of existing authoritative guidance on the prominence of non-GAAP financial metrics in earnings releases and other SEC filings. Using an experimental design, we isolate this unexplored regulatory gap and investigate how non-GAAP earnings metrics disseminated via an image on social media and presented prominently in a hyperlinked earnings release interact to influence investors’ reliance on non-GAAP earnings. The results from our primary experiment indicates that nonprofessional investors fixate less on the non-GAAP metric when GAAP earnings is presented more prominently in the earnings release in line with SEC rules. However, when the firm disseminates an image tweet featuring the non-GAAP figure, nonprofessional investors rely more on the non-GAAP metric even when the earnings press release features the GAAP metric more prominently. Additional results from supplemental experiments confirm that background imagery operates as a distinctively unique prominence tool that differentially influences investor judgments compared to traditional text-based prominence.",
keywords = "Non-GAAP Earnings, Image, Social Media, Twitter, Investment Decisions",
author = "Brown, {Nerissa C.} and Elliott, {W. Brooke} and Grant, {Stephanie M.}",
year = "2018",
month = "1",
day = "27",
doi = "10.2139/ssrn.3080994",
language = "English (US)",
pages = "42",
type = "WorkingPaper",

}

TY - UNPB

T1 - Non-GAAP Images, Press Release Prominence, and Investors’ Reliance on Non-GAAP Earnings

AU - Brown, Nerissa C.

AU - Elliott, W. Brooke

AU - Grant, Stephanie M.

PY - 2018/1/27

Y1 - 2018/1/27

N2 - Firms are increasingly disseminating images on social media that prominently display customized measures of the firm’s earnings performance (labeled as “non-GAAP images”). This disclosure practice falls outside the scope of existing authoritative guidance on the prominence of non-GAAP financial metrics in earnings releases and other SEC filings. Using an experimental design, we isolate this unexplored regulatory gap and investigate how non-GAAP earnings metrics disseminated via an image on social media and presented prominently in a hyperlinked earnings release interact to influence investors’ reliance on non-GAAP earnings. The results from our primary experiment indicates that nonprofessional investors fixate less on the non-GAAP metric when GAAP earnings is presented more prominently in the earnings release in line with SEC rules. However, when the firm disseminates an image tweet featuring the non-GAAP figure, nonprofessional investors rely more on the non-GAAP metric even when the earnings press release features the GAAP metric more prominently. Additional results from supplemental experiments confirm that background imagery operates as a distinctively unique prominence tool that differentially influences investor judgments compared to traditional text-based prominence.

AB - Firms are increasingly disseminating images on social media that prominently display customized measures of the firm’s earnings performance (labeled as “non-GAAP images”). This disclosure practice falls outside the scope of existing authoritative guidance on the prominence of non-GAAP financial metrics in earnings releases and other SEC filings. Using an experimental design, we isolate this unexplored regulatory gap and investigate how non-GAAP earnings metrics disseminated via an image on social media and presented prominently in a hyperlinked earnings release interact to influence investors’ reliance on non-GAAP earnings. The results from our primary experiment indicates that nonprofessional investors fixate less on the non-GAAP metric when GAAP earnings is presented more prominently in the earnings release in line with SEC rules. However, when the firm disseminates an image tweet featuring the non-GAAP figure, nonprofessional investors rely more on the non-GAAP metric even when the earnings press release features the GAAP metric more prominently. Additional results from supplemental experiments confirm that background imagery operates as a distinctively unique prominence tool that differentially influences investor judgments compared to traditional text-based prominence.

KW - Non-GAAP Earnings

KW - Image

KW - Social Media

KW - Twitter

KW - Investment Decisions

U2 - 10.2139/ssrn.3080994

DO - 10.2139/ssrn.3080994

M3 - Working paper

SP - 42

BT - Non-GAAP Images, Press Release Prominence, and Investors’ Reliance on Non-GAAP Earnings

ER -