The unusual debate on non-GAAP reporting in the current standard practice. The lens of corporate governance

Arena, Claudia; Catuogno, Simona; Moscariello, Nicola

doi:10.1007/s10997-020-09515-z

Cited by 11 publications

(19 citation statements)

References 78 publications

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“…These theoretical articles also include seven literature reviews (e.g., Arena et al. 2021 ; Catuogno and Arena 2020 ; Marques 2017 ). In contrast to these (rather) objective theoretical articles, however, about one tenth (12.2%) of the analysed sample are articles in which the authors present their subjective opinion , for example on theoretical research aspects (e.g., discussion and review articles) or practical aspects of APM reporting, such as current regulatory initiatives by ESMA or IASB (e.g., commentaries and viewpoints).…”

Section: Methodsmentioning

confidence: 99%

“…Most of these articles (20.2%) are theoretical in nature and discuss the purpose, definitions and/or trends of APM reporting (e.g., Pizzo 2020; Sherman and Young 2018;Papa 2017;Ciesielski and Henry 2017) or regulatory implications (e.g., Adams and Meckfessel 2021;Di Fabio and Roncagliolo 2020;Parrino 2019), as far as possible, from an objective perspective. These theoretical articles also include seven literature reviews (e.g., Arena et al 2021;Catuogno and Arena 2020;Marques 2017). In contrast to these (rather) objective theoretical articles, however, about one tenth (12.2%) of the analysed sample are articles in which the authors present their subjective opinion, for example on theoretical research aspects (e.g., discussion and review articles) or practical aspects of APM reporting, such as current regulatory initiatives by ESMA or IASB (e.g., commentaries and viewpoints).…”

Section: Methodsmentioning

confidence: 99%

“…Second, in contrast to previous literature reviews (e.g., Arena et al 2021;Catuogno and Arena 2020;Marques 2017;Hitz 2010a), our SLR provides for a broader coverage of APM literature. Since accounting research traditionally also takes place in other types of publications (Carmona 2006), we do not limit our sample only on articles published in renowned double-blind peer-reviewed academic journals.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Alternative Performance Measures: A Structured Literature Review of Research in Academic and Professional Journals

Herr

Lorson

Pilhofer

2022

Schmalenbach J Bus Res

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For more than two decades, the reporting of so-called ‘alternative performance measures’ (APMs) has been a common phenomenon in external financial reporting. APMs are voluntarily disclosed and generally unaudited performance measures. Typically, APMs modify earnings measures calculated in accordance with generally accepted accounting principles (GAAP) by (subjectively) adjusting certain earnings components. In the academic literature, with the information motive on the one hand and the motive of (adversarial) investor influence on the other hand, two alternative explanations for the voluntary reporting of alternative performance measures are discussed, which are difficult, if not impossible, for external stakeholders to disentangle. Taking into account the recent developments in more than 250 published articles in the last decade, this paper critically reviews a wide range of literature from the United States (U.S.), Europe and, to a less extent, Australia/Asia. In particular, we analyse a comprehensive sample of more than 400 research papers published in academic and professional journals as well as other publications which are important in the academic discourse. The purpose of this paper is to identify relevant research gaps that provide starting points for future research. For this purpose, our methodological approach strictly follows structured literature review (SLR) methodology in order to minimise researcher idiosyncrasies. Thus, our SLR facilitates a decided derivation of research gaps based on a reliable and valid analytical framework which has been deductively derived from previous research.

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Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Alternative Performance Measures: A Structured Literature Review of Research in Academic and Professional Journals

Herr

Lorson

Pilhofer

2022

Schmalenbach J Bus Res

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“…Prior studies have resorted to agency theory to explain the role of external audit in enhancing disclosure quality. An effective audit function mitigates the information asymmetry and conflicts of interest that occur between managers and shareholders (Arena et al, 2020) by reducing monitoring costs and providing valuable information (Carcello and Neal, 2003). Therefore, drawing on agency theory, we argue that the auditing process represents an effective monitoring mechanism that would help to improve the quality of non-financial disclosures (Agyei-Mensah, 2019) due to the auditor's ability to reduce reporting biases and misstatements.…”

Section: External Audit Qualitymentioning

confidence: 99%

“…Against this backdrop, this paper investigates companies' disclosure practices concerning NFKPIs' consistency over time and their relationship with corporate governance quality. Corporate governance is considered an effective mechanism in influencing the quality of non-financial disclosure (Arena et al, 2020). Previous studies document that companies with stronger corporate governance tend to provide higher non-financial disclosure quality (Gao et al, 2016;Iatridis, 2013;Lim et al, 2007).…”

Section: Introductionmentioning

confidence: 99%

Corporate governance quality and non-financial KPI disclosure comparability: UK evidence

et al. 2021

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This study examines the quality of non-financial disclosure in Strategic Reports, focusing on non-financial key performance indicators (NFKPIs). A vital issue for NFKPI disclosure quality deals with overtime comparability. As NFKPI disclosure is mainly based on managers' discretional choices regarding which indicators to disclose and how, we argue that corporate governance could play a key role in affecting disclosure practices. The analysis of a sample of UK listed companies from different industries reveals that most companies consistently report NFKPIs and that disclosure practices are influenced by the quality of the board of directors. Additional analyses indicate that among board characteristics, experience in financial key roles is the most effective. Further, intangible intensity is found to be positively associated with NFKPI consistency. Finally, more leveraged and less profitable firms seem to pay more attention to disclosure consistency, supporting the argument that they are subject to more severe scrutiny. This study is the first to examine the relationship between governance quality and NFKPI consistency. It enlarges previous evidence on the relation between corporate governance and disclosure by supporting the role of the board of directors in monitoring non-financial reporting.

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Adjusted versus unadjusted earnings: An empirical analysis of pro forma adjustments in large German public companies

Wiek

Eichner

2023

J Corp Accounting Finance

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This article analyzes non‐GAAP, pro forma earnings metrics of large German publicly traded companies to better understand their usage and relevance in practice. We base our analysis on a hand collected data set compiled from annual reports. Almost all companies in our data set use pro forma earnings. Typically, legal, restructuring, acquisition and accounting related costs get adjusted. EBIT, EBITDA, EPS and Net income are the most frequently adjusted earnings metrics. In almost all observed cases, pro forma earnings are higher than their underlying GAAP earnings. Our study addresses the challenge of investors to understand a company's “true” operating performance. Only when one understands the historically observable financial performance, one can make better predictions of its recurring, future financial performance. The article adds to the existing literature by analyzing in which part of the annual report pro forma earnings are typically disclosed, how transparent they are presented and reconciled, and what impact adjustments have compared to the unadjusted GAAP earnings.

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The unusual debate on non-GAAP reporting in the current standard practice. The lens of corporate governance

Cited by 11 publications

References 78 publications

Alternative Performance Measures: A Structured Literature Review of Research in Academic and Professional Journals

Alternative Performance Measures: A Structured Literature Review of Research in Academic and Professional Journals

Corporate governance quality and non-financial KPI disclosure comparability: UK evidence

Adjusted versus unadjusted earnings: An empirical analysis of pro forma adjustments in large German public companies

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