Characteristics of companies disclosing Non-GAAP earnings

Abstract

Purpose: This study investigates factors that are associated with the likelihood of New Zealand listed companies disclosing non-GAAP earnings performance measures.

Design/methodology/approach: The study uses logistic regression analysis of 516 firm year observations of New Zealand companies for the period 2009 to 2014.

Findings: The research evidence suggests that New Zealand listed companies that are most likely to disclose non-GAAP earnings are larger, have higher analyst following and have a higher proportion of independent directors compared with other companies. In addition, firms with higher incidence of restructuring charges are more likely to disclose non-GAAP earnings.

Research limitations/implications: The study uses the population of New Zealand listed companies which is small by international standards. However, the financial reporting practices of New Zealand companies is important to for the efficient and effective operation of the sharemarket for investors. The results suggest that New Zealand listed companies that are under greater scrutiny because of their size and analyst following are motivated to provide additional disclosures of non-GAAP profit information to the market.

Originality/value: The study contributes to the literature on the voluntary disclosure of non-GAAP earnings in the New Zealand capital market.