Publication Type
Journal Article
Publication Date
12-2003
Abstract
This study investigates whether market participants perceive pro forma earnings to be more informative and more persistent than GAAP operating income by analyzing a sample of 1,149 actual pro forma press releases. We find that pro forma announcers report frequent GAAP losses and are mostly concentrated in the service and high-tech industries. Our analyses of short-window abnormal returns and revisions in analysts’ one-quarter-ahead earnings forecasts indicate that pro forma earnings are more informative and more permanent than GAAP operating earnings. Our evidence suggests that market participants believe pro forma earnings are more representative of “core earnings” than GAAP operating income.
Keywords
Pro forma earnings, Information content of earnings, Persistence of earnings, Analysts’ forecasts
Discipline
Accounting | Corporate Finance
Research Areas
Financial Intermediation and Information
Publication
Journal of Accounting and Economics
Volume
36
Issue
1-3
First Page
285
Last Page
319
ISSN
0165-4101
Identifier
10.1016/j.jacceco.2003.06.001
Publisher
Elsevier
Citation
BHATTACHARYA, Nilabhra; Black, Erv; Christensen, Ted; and Larson, Chad.
Assessing the relative informativeness and permanence of pro forma earnings and GAAP operating earnings. (2003). Journal of Accounting and Economics. 36, (1-3), 285-319.
Available at: https://ink.library.smu.edu.sg/soa_research/967
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