TY - JOUR
T1 - Analysts’ GAAP earnings forecasts and their implications for accounting research
AU - Bradshaw, Mark T.
AU - Christensen, Theodore E.
AU - Gee, Kurt H.
AU - Whipple, Benjamin C.
PY - 2018/8
Y1 - 2018/8
N2 - We use newly available GAAP forecasts to document that traditionally-identified GAAP forecast errors contain 37% measurement error. Correcting for this measurement error, we settle a long-standing debate regarding investor preference for GAAP versus non-GAAP earnings and provide strong evidence of a preference for non-GAAP earnings. We also revisit the use of non-GAAP exclusions to meet analysts’ forecasts when GAAP earnings fall short. Results indicate that 34% of these traditionally-identified meet-or-beat firms are misidentified due to measurement error, and this error masks evidence that firms more frequently exclude transitory rather than recurring expenses for meet-or-beat purposes.
AB - We use newly available GAAP forecasts to document that traditionally-identified GAAP forecast errors contain 37% measurement error. Correcting for this measurement error, we settle a long-standing debate regarding investor preference for GAAP versus non-GAAP earnings and provide strong evidence of a preference for non-GAAP earnings. We also revisit the use of non-GAAP exclusions to meet analysts’ forecasts when GAAP earnings fall short. Results indicate that 34% of these traditionally-identified meet-or-beat firms are misidentified due to measurement error, and this error masks evidence that firms more frequently exclude transitory rather than recurring expenses for meet-or-beat purposes.
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U2 - 10.1016/j.jacceco.2018.01.003
DO - 10.1016/j.jacceco.2018.01.003
M3 - Article
AN - SCOPUS:85046644891
SN - 0165-4101
VL - 66
SP - 46
EP - 66
JO - Journal of Accounting and Economics
JF - Journal of Accounting and Economics
IS - 1
ER -