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Isidro, H. & Marques, A. (2019). Industry competition and signaling financial performance with non-gaap earnings. In American Accounting Association Annual Meeting 2019.
H. O. Isidro and A. Marques, "Industry competition and signaling financial performance with non-gaap earnings", in American Accounting Association Annu. Meeting 2019, 2019
@inproceedings{isidro2019_1714708990422, author = "Isidro, H. and Marques, A.", title = "Industry competition and signaling financial performance with non-gaap earnings", booktitle = "American Accounting Association Annual Meeting 2019", year = "2019", editor = "", volume = "", number = "", series = "", publisher = "", address = "", organization = "", url = "https://aaahq.org/Meetings/2019/Annual-Meeting" }
TY - CPAPER TI - Industry competition and signaling financial performance with non-gaap earnings T2 - American Accounting Association Annual Meeting 2019 AU - Isidro, H. AU - Marques, A. PY - 2019 UR - https://aaahq.org/Meetings/2019/Annual-Meeting AB - We explore how product market competition affects managers’ use of non-GAAP earnings to signal financial performance. Using hand-collected data for large European firms, we find that the non-GAAP earnings signal conveyed by managers (i.e. the difference between non-GAAP and GAAP earnings) is higher when competition is strong. Moreover, we show that in strong competitive environments firms with low GAAP performance increase less their non-GAAP earnings signal than firms with high GAAP performance. Low performing firms continue to experience below industry performance in subsequent periods, thus the non-GAAP signal appear to be consistent with their expected weak future performance. These findings are in line with a signaling cost argument; industry competition can restrain aggressive non-GAAP reporting as false signals about current and future earnings performance may induce the entrance of new competitors or overproduction by existing ones, reducing the firm’s low income even further. ER -