Christensen, Theodore E.
[VerfasserIn]
;
Pei, Hang
[Sonstige Person, Familie und Körperschaft];
Pierce, Spencer
[Sonstige Person, Familie und Körperschaft];
Tan, Liang
[Sonstige Person, Familie und Körperschaft]
Non-GAAP Reporting Following Debt Covenant Violations
Anmerkungen:
In: Review of Accounting Studies 24, no. 2 (2019): 629-664
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 1, 2018 erstellt
Beschreibung:
We investigate whether firms change their non-GAAP reporting practices after debt covenant violations. We find that the likelihood that a firm will disclose non-GAAP earnings decreases and (for those that continue to disclose) the quality of non-GAAP reporting improves following covenant violations, consistent with stronger shareholder monitoring during this period of scrutiny. Consistent with increased monitoring following a debt covenant violation, cross-sectional analyses indicate that these changes in non-GAAP reporting are concentrated among firms with strong governance. Moreover, we find that investor demand for disclosure (proxied by analyst-provided non-GAAP performance metrics and EDGAR search volume) increases following a covenant violation. Collectively, our evidence is consistent with heightened investor scrutiny following covenant violations, and it casts doubt on the competing explanation that shareholders delegate monitoring to creditors following a covenant violation. Overall, our evidence provides new insights on the determinants of firms' non-GAAP reporting practices and an alternative view about how debt covenant violations influence voluntary disclosure