The relation between institutional factors and the reporting choice of non-gaap earnings in a cross-country setting
DOI:
https://doi.org/10.11606/issn.1982-6486.rco.2025.233094Keywords:
Non-GAAP earnings, EBITDA, Institutional factorsAbstract
In this paper we examine the role of institutional and firm-specific factors on non-GAAP earnings reporting decision in a cross-country setting, using an international sample of actual non-GAAP earnings reporters. Existing evidence suggests that these factors shape firms’ reporting incentives, thereby affecting their voluntary disclosure choices. Our paper contributes to the literature by addressing a significant gap highlighted in previous research, investigating non-GAAP earnings disclosure phenomenon across G20 countries. We provide novel evidence by focusing on annual data from fiscal years 2013-2022. To the best we know, this is the third study to investigate non-GAAP earnings determinants for an international sample and the second to reach a sample of actual non-GAAP earnings reporters, rather than using proxies as substitutes. Our findings suggest, consistent with prior research, that firms located in countries with stronger economic conditions and robust reporting environments are more likely to report non-GAAP earnings measures. Specifically, countries with non-GAAP regulation, developed equity markets, strong investor protection and common law origins foster voluntary non-GAAP earnings disclosures as strategic performance measures. These results suggest that firms from countries with stronger economic conditions and higher-quality reporting environments face greater incentives to avoid managing GAAP earnings, forcing them to disclose supplementary performance measures.
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