Future Performance and Expenses Excluded from Pro Forma Earnings

DOI: 10.5176/2251-1997_AF14.24

Authors: Shin-Rong Shiah-Hou, and Ling Yang

Abstract:

We empirically examine the informativeness of pro forma earnings through the quality of non-GAAP earnings exclusions. We find that, on average, recurring items, that include Depreciation and Amortization expense, Stock-base compensation costs, and R&D expenses, are significantly negatively associated with future performance.

Keywords: Pro Forma Earnings, Non-GAAP Earnings, GAAP Earnings, Accounting Performance