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Do Investors Respond Differently to Non-GAAP Earnings After Material GAAP Restatements?

Christian Sofilkanitsch

Accounting Horizons2026https://doi.org/10.2308/horizons-2025-176article
AJG 3ABDC A
Weight
0.50

Abstract

SYNOPSIS I investigate whether investors change their responsiveness to non-GAAP earnings following the revelation of past GAAP reporting failures. Using an event-study design, I find that the earnings response coefficient (ERC) for non-GAAP earnings declines by 40.4 percent after the announcement of material GAAP restatements, suggesting that investors view non-GAAP earnings as less informative once the reliability of the underlying GAAP framework is called into question. The decline in non-GAAP ERCs is not explained by changes in delayed investor reactions or non-GAAP-related SEC comment letters. Taken together, the results are consistent with a credibility spillover across mandatory and voluntary reporting frameworks, whereby investors use GAAP signals to infer the credibility of non-GAAP earnings. My findings underscore the interconnectedness of GAAP and non-GAAP reporting and contribute to ongoing debates about the credibility of non-GAAP measures. Data Availability: The data are available from the sources indicated in the text. JEL Classifications: G14; D82; M41.

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https://doi.org/https://doi.org/10.2308/horizons-2025-176

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@article{christian2026,
  title        = {{Do Investors Respond Differently to Non-GAAP Earnings After Material GAAP Restatements?}},
  author       = {Christian Sofilkanitsch},
  journal      = {Accounting Horizons},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.2308/horizons-2025-176},
}

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Do Investors Respond Differently to Non-GAAP Earnings After Material GAAP Restatements?

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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