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A Re-Examination of the “Informational” Role of Non-GAAP Earnings in the Post-Reg G Period

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  • Xuan Song

    (School of Business, Belhaven University, Jackson, MS 39202, USA)

  • Huan Qiu

    (Else School of Management, Millsaps College, Jackson, MS 39210, USA
    Department of Finance, College of Business and Economics, Boise State University, Boise, ID 83725, USA)

  • Ying Lin

    (School of Business, Belhaven University, Jackson, MS 39202, USA)

  • Michael S. Luehlfing

    (School of Accountancy, College of Business, Louisiana Tech University, Ruston, LA 71272, USA)

  • Marcelo Eduardo

    (School of Business, Mississippi College, Clinton, MS 39058, USA)

Abstract

In this study, we utilize a unique quarterly dataset of non-GAAP earnings to re-examine the “informational” role of non-GAAP earnings from the perspective of value relevance and earnings predictability in the post-Reg G period. We find that non-GAAP earnings are more value relevant and can better predict future operating earnings of a firm compared to equivalent GAAP earnings. Additionally, we also find empirical evidence suggesting that the difference in the value relevance and earnings predictability between non-GAAP and equivalent GAAP earnings can vary across but cannot be completely mitigated by firm-level characteristics, such as the market value of equity, accruals quality, analyst coverage, and managerial ability of a firm. Moreover, our supplementary analysis reveals that the superior value relevance and predictive power of non-GAAP earnings persist even after the SEC’s release of the Compliance and Disclosure Interpretations (C&DI) in 2010. Overall, our empirical evidence suggests a superior “informational” role of non-GAAP earnings to equivalent GAAP earnings in terms of valuation and predictability on future operating performance in the post-Reg G period.

Suggested Citation

  • Xuan Song & Huan Qiu & Ying Lin & Michael S. Luehlfing & Marcelo Eduardo, 2025. "A Re-Examination of the “Informational” Role of Non-GAAP Earnings in the Post-Reg G Period," JRFM, MDPI, vol. 18(8), pages 1-32, July.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:8:p:414-:d:1710851
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    References listed on IDEAS

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