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Proximity to broad bond rating change and non-GAAP earnings disclosure

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  • Li Sun

Abstract

PurposeThis study aims to examine the relation between firms nearing a broad bond rating change (a rating that includes a plus or minus specification) and their use of non-GAAP earnings reporting.Design/methodology/approachThis study uses regression analysis to examine this relation.FindingsAnalyzing a large panel sample from 2002 to 2020, the authors find that firms approaching a broad bond rating change are more likely to report non-GAAP earnings relative to firms not in this position. Further analysis reveals that firms with a plus specification in their bond ratings are less inclined to report non-GAAP earnings. In contrast, firms with a minus specification are significantly more likely to disclose non-GAAP earnings. Hence, the primary findings are primarily driven by firms with a minus specification.Originality/valueThis study connects two separate streams of literature: bond credit ratings from finance and non-GAAP earnings from accounting.

Suggested Citation

  • Li Sun, 2025. "Proximity to broad bond rating change and non-GAAP earnings disclosure," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 37(5), pages 762-786, June.
    • Handle: RePEc:eme:parpps:par-10-2024-0276
    DOI: 10.1108/PAR-10-2024-0276
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