The article “Financial Regulation Policy Uncertainty and Non-GAAP Earnings Disclosure” jointly by Chan, A. L.-C., Chen, V. Y. S., Lee, E., & Xiao, F.(MPU) has been published in Journal of Accounting, Auditing & Finance. (ESCI, SCOPUS)
This study examines how uncertainty surrounding financial regulation policies affects managers’ discretionary disclosure of non-GAAP earnings. Our findings suggest that when financial regulation policy uncertainty is high, managers are more likely to disclose non-GAAP earnings to attract investors. We also find that managers become more aggressive in reporting non-GAAP earnings, particularly by excluding more recurring expenses during uncertain periods. Our findings of both a higher likelihood and lower quality of non-GAAP reporting are more pronounced among financially distressed firms, as these firms are more sensitive to the impact of financial regulatory uncertainty. Further analysis indicates that, as non-GAAP earnings become less informative in such times, investors place less trust in them. Overall, our empirical evidence suggests that uncertainty in the financial regulatory process exerts a negative externality on voluntary disclosure practices by company management.
The article can be read here:
https://journals.sagepub.com/doi/abs/10.1177/0148558X251411599