Brown, Nerissa C.
[VerfasserIn]
;
Christensen, Theodore E.
[Sonstige Person, Familie und Körperschaft];
Steffen, Thomas D.
[Sonstige Person, Familie und Körperschaft];
Menini, Andrea
[Sonstige Person, Familie und Körperschaft]
Non-GAAP Earnings Disclosure and the Valuation of IPOs
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 14, 2020 erstellt
Beschreibung:
We investigate the disclosure and prominence of non-GAAP earnings metrics in IPO prospectuses and how these disclosures affect IPO valuation. In contrast to already-public firms, we find an inverted U-shaped relation between IPO firms' GAAP performance and the likelihood that they will disclose a non-GAAP metric, suggesting differing motivations for non-GAAP disclosure in the IPO setting. Our valuation tests indicate that IPO firms disclosing non-GAAP earnings metrics generally exhibit higher offer values and less undervaluation during the IPO process and that the disclosure of adjusted earnings information in the prospectus enables them to minimize undervaluation by economically significant amounts. We find, however, that these valuation effects depend on how issuers calculate the non-GAAP figure. Specifically, our results indicate that IPOs are more undervalued when prospectuses contain non-GAAP metrics with larger recurring exclusions (which are less justifiable and generally viewed to be more aggressive). Additional analyses of post-IPO stock returns suggest that aggressive recurring exclusions are appropriately discounted during the IPO process