DOI:10.1111/j.1475-679X.2011.00427.x
七年级历史上册
丁父忧Journal of Accounting Rearch
Vol.50No.1March2012
Printed in U.S.A.
雷电灾害
Investor Sentiment and Pro Forma Earnings Disclosures
N E R I S S A C.B R O W N,∗T H E O D O R E E.C H R I S T E N S E N,†
W.B R O O K E E L L I O T T,‡A N D R I C H A R D D.M E R G E N T H A L E R
§
Received13April2009;accepted31July2011
ABSTRACT
We examine the influence of investor ntiment on managers’discre-tionary disclosure of“pro forma”(
法律援助申请书adjusted)earnings metrics in earn-ings press releas.Wefind that managers’propensity to disclo an ad-justed earnings metric(especially one that exceeds the GAAP earnings number)increas with the level of investor ntiment.Furthermore,our analys suggest that,as investor ntiment increas,managers:(1)ex-clude higher levels of both recurring and nonrecurring expens in cal-culating the pro forma earnings number and(2)emphasize the pro formafigure by placing it more prominently within the earnings press
∗Georgia State University;†Brigham Young University;‡University of Illinois at Urbana–Champaign;
§University of Iowa.We thank Abbie Smith(the Editor)and an anony-mous referee for valuable insights and suggestions.We also thank Dan Bens,Brian Cadman, Kun-chih Chen,Michael Clement,Rebecca Files,Dov Fischer,Umit Gurun,Christo Karuno, John McInnis,Darren Roulstone,Thorsten Sellhorn,Devin Shanthikumar,Siew Hong Teoh, Jeff Wurgler,Teri Yohn,and workshop participants at the University of Arizona,University of California(Irvine),University of Colorado(Boulder),Erasmus University,George Washing-ton University,Georgia State University,University of Iowa,Ohio State University,University of South Florida,Southern Methodist University,University of Texas(Dallas),University of Utah, University of Washington(Seattle),the19th Annual Conference on Financial Economics and Accounting,the2009AAA Annual Meetings,and the2
011EAA Annual Congress for helpful comments and suggestions.We are grateful to Malcolm Baker and Jeff Wurgler for sharing their ntiment index data(available at u.edu/∼jwurgler/)and Itzhak Ben-David,John Graham,and Campbell Harvey for sharing managerial optimism data from the Duke University/CFO Magazine Business Outlook Survey.Finally,we thank the many re-arch assistants at Brigham Young University who helped in hand-collecting our sample of pro forma earnings data.
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鸡蛋壳有什么用
Copyright C ,University of Chicago on behalf of the Accounting Rearch Center,2011
2N.C.BROWN ET AL.
浦宁之珠relea.Additional analys indicate that the association between investor n-timent and managers’pro forma disclosure decisions at least partly reflects opportunistic motives.Finally,wefind that managers’own ntiment-driven expectations also play a role in their pro forma disclosure decisions.
1.Introduction
Prior rearch examines the influence of investor ntiment on corporate decisions such as capital investments,dividend payments,stock splits,and corporate name changes.1However,as Baker,Ruback,and Wurgler[2007] obrve,there is limited evidence on the association between investor n-timent and managers’disclosure decisions.We address this issue by exam-ining the relation between investor ntiment and the discretionary disclo-sure of“pro forma”(adjusted)earnings measures.2Specifically,we examine the influence of investor ntiment on managers’decisions to:(1)disclo an adjusted earnings metric within the quarterly earnings press relea,(2) exclude higher levels of recurring and nonrecurring items in calculating the pro forma earningsfigure,and(3)emphasize the pro forma metric by placing it more prominently within the earnings press relea.We fur-ther investigate whether the relation between investor ntiment and pro forma earnings disclosure reflects managers’attempts to inform or mislead investors,or whether it reflects managers’own ntiment-driven beliefs. While investor ntiment may influence various forms of corporate dis-closure,we focus on pro forma earnings disclosure for three reasons. First,in a recent survey offinancial executives,Graham,Harvey,and Raj-gopal[2005]find that managers view pro forma earnings to be one of the most important performance metrics disclod to investors.Second, while prior rearchfinds that investors perceive manager-adjusted pro forma earnings to be more informative than GAAP earnings(, Bhattacharya et al.[2003],Lougee an智慧健康养老
d Marquardt[2004],Bowen,Davis, and Matsumoto[2005]),veral studies suggest that some managers u pro forma earnings disclosures aggressively and that investors may be mis-led by overly optimistic pro forma ,Doyle,Lundholm,and Soliman[2003],Frankel,McVay,and Soliman[2011],Brown,Christenn, and Elliott[2011]).This evidence is particularly salient since prior rearch suggests that less-sophisticated investors—who are most affected by nti-ment(Kumar and Lee[2006],Baker and Wurgler[2007])—rely heavily on pro forma earnings information and are arguably the most at risk of be-ing misled(Frederickson and Miller[2004],Elliott[2006],Bhattacharya 1See Morck,Shleifer,and Vishny[1990],Cooper,Dimitrov,and Rau[2001],Baker,Stein, and Wurgler[2003],Baker and Wurgler[2004],Cooper et al.[2005],Baker,Greenwood,and Wurgler[2009],Polk and Sapienza[2009].
2The behavioralfinance literature defines investor ntiment as optimism or pessimism about stocks in general or when investor beliefs about futurefirm value deviate from current fundamental information(DeLong et al.[1990],Morck,Shleifer,and Vishny[1990],Baker and Wurgler[2006,2007]).
INVESTOR SENTIMENT AND PRO FORMA EARNINGS DISCLOSURES3 et al.[2007]).Third,anecdotal evidence suggests that pro forma report-ing trends cloly track recent stock market bubbles(Bradshaw and Sloan [2002],Dyck and Zingales[2003],Bhattacharya et al.[2004])and
that in-vestor ntiment may have influenced the disclosure of pro forma earn-ings measures during bubble periods(Henry[2001],D’Avolio,Gildor,and Shleifer[2002]).Taken together,the arguments suggest that pro forma earnings disclosure provides a unique tting for exploring the relation be-tween investor ntiment and managers’disclosure decisions.正宗蒜蓉粉丝蒸虾
In the formulation of our hypothes,we discuss three competing views that could explain the association between investor ntiment and man-agers’pro forma disclosure decisions:the informative,opportunistic,and managerial ntiment views.The informative and opportunistic views pre-sume that managers are able to identify instances of ntiment for their own firm and disclo a pro formafigure in an attempt to either provide more value-relevant core earnings information to ntiment-driven investors(in-formative view)or to opportunistically affect investors’ntiment-driven be-liefs offirm performance,irrespective of the information content of the pro forma earnings metric(opportunistic view).The managerial ntiment view presumes that managers may be susceptible to the same market-wide ntiment as investors and disclo a pro formafigure that reflects their own ntiment-driven beliefs.
In discussing the informative and opportunistic views,we draw on exist-ing theories of voluntary disclosure and social cognition,and argue that the cost-benefit trade-off of pro forma earnings disclos
ure will vary with investor ntiment.Prior rearch on social cognition suggests that pessimistic indi-viduals exerci greater scrutiny and are less likely to take information at face value than optimistic individuals(Schwarz[1990],Taylor[1991],Bless et al.[1996]).We therefore contend that during optimistic(pessimistic)pe-riods,investors will evaluate managers’pro forma disclosures less(more) rigorously and that this reduced(heightened)investor scrutiny will result in managers facing lower(higher)disclosure-related costs.This ntiment-induced shift in disclosure costs suggests that managers’propensity to dis-clo a pro forma earnings metric will increa with investor ntiment, irrespective of managers’intent.We expect this same positive association under the managerial ntiment view.Specifically,during optimistic(pes-simistic)periods,ntiment-driven managers may choo to disclo an ad-justed earnings metric that reflects their own overly optimistic(pessimistic) perceptions of thefirm’s earnings performance.We also hypothesize a sig-nificant association between investor ntiment and the level of managers’earnings exclusions.Last,we predict a positive association between investor ntiment and managers’propensity to emphasize the pro forma earnings figure by placing it more prominently(relative to GAAP earnings)within the earnings press relea.
In our empirical tests,wefirst examine whether investor ntiment is sig-nificantly associated with ma
nagers’pro forma disclosure decisions.Next, we explore whether our results could be partly attributable to managers’
4N.C.BROWN ET AL.
own ntiment-driven expectations.We then investigate whether the in-formative or opportunistic view is most descriptively valid for our results before drawing any inferences about management’s intentions.Following prior rearch,we u the ntiment index developed by Baker and Wur-gler[2006,2007]as an empirical proxy for the temporal variation infirm-level ntiment.3The Baker-Wurgler index is bad on six market-bad ntiment proxies,which capture the demand shocks of ntiment-driven investors and limits to arbitrage.Each ntiment proxy is orthogonalized to veral macroeconomic measures to remove any correlation with common economic fundamentals.We ba our empirical analys on a within-firm rearch design that compares all pro forma and non-pro-forma quarters for the same t offirms over our sample period.Our hand-collected sam-ple compris36,672quarterly earnings announcements(7,157pro forma quarters and29,515non-pro-forma quarters)issued by1,954firms over the 1998to2005period.
Using a logit model,we analyze the relation between investor ntiment and the decision to report pr
o forma earnings information in the current quarter,while controlling for analysts’expectations and veral other corre-lated factors.Our results indicate that the propensity to disclo an adjusted earnings metric increas with the level of investor ntiment.Moreover, wefind that,as investor ntiment increas,managers are more likely to disclo a pro forma earningsfigure that exceeds the bottom-line GAAPfig-ure;however,the level of investor ntiment is not significantly associated with the propensity to report a pro formafigure that is below the GAAP earnings number.We alsofind a positive relation between ntiment and the level of managers’total recurring and nonrecurring exclusions as well as their incremental recurring ,incremental to tho made by analysts).Our results also indicate that,as investor ntiment increas, managers tend to emphasize the pro forma earningsfigure by placing it more prominently within the press relea.
Our next t of analys explores whether managers’own ntiment-driven expectations also affectfirm’s pro forma disclosure decisions.To 3Given the difficulty in measuringfirm-level ntiment,the Baker-Wurgler index focus on market-bad proxies of obrvable patterns in mispricing(ntiment).While there are limitations to this empirical approach,we contend that our u of a market-bad measure is consistent with prior evidence suggesting that systematic shifts in ntiment are common across stocks,where optimistic(pessimistic)investors extrapolate good(bad)n
ews across allfirms in general(e Shiller[2000],Conrad,Cornell,and Landsman[2002],Mian and Sankaraguruswamy[2010]).Moreover,as Baker,Ruback,and Wurgler[2007]note,firm-level ntiment proxies are often confounded by unrelatedfirm-specific factors.Thus,the u of a market-bad ntiment proxy ensures that our results are not confounded by other factors that could be correlated withfirms’pro forma disclosure decisions.Nonetheless,our infer-ences are unchanged when we u(1)two widely udfirm-level proxies of investor ntiment: stock return momentum and the ratio of book-to-market value of equity and(2)an alternative survey-bad measure of current investor beliefs:Investors Intelligence(II)Sentiment Survey Index.
INVESTOR SENTIMENT AND PRO FORMA EARNINGS DISCLOSURES5 address this issue,we replicate our analys while including managerial ntiment as an additional explanatory factor.We measure managerial n-timent bad on the Duke University/CFO Magazine Business Outlook Sur-vey measure of managerial optimism(e Ben-David,Graham,and Harvey [2010]).While we stillfind a strong positive investor ntiment effect,we alsofind a positive effect of managerial ntiment on both the disclosure and prominence of pro forma earnings metrics.Hence,our results suggest that investor and managerial ntiment both play a role infirms’pro forma disclosure decisions.
We further investigate whether the impact of investor ntiment is more consistent with managers’deliberate attempt to inform or mislead in-vestors.Following prior rearch(Kolev,Marquardt,and McVay[2008], Frankel,McVay,and Soliman[2011]),wefirst test for potential manage-rial opportunism by analyzing the average quality of managers’pro forma earnings exclusions,conditional on the level of investor ntiment.Prior rearch defines“high-quality”pro forma exclusions as tho that are tran-sitory or have the least predictive power for future earnings performance (e.g.,Doyle,Lundholm,and Soliman[2003],Gu and Chen[2004]).Con-verly,“low-quality”exclusions are tho that persist in future periods and, therefore,are not fully transitory or unimportant as some managers claim. Our earnings predictability tests indicate that,as investor ntiment in-creas,the exclusions made by managers(especially exclusions of recur-ring expens)have negative implications for future earnings performance. We alsofind that,as investor ntiment increas,the predictability of man-agers’recurring exclusions is even more negative in tho cas where man-agers disclo the pro formafigure more prominently.The results suggest that the u of low-quality earnings exclusions increas with investor n-timent and that this behavior is more pervasive when managers emphasize the pro forma earningsfigure within the press relea.Our results also in-dicate that the u of low-quality pro forma exclusions is not significantly associated with managers’own ntiment-driven expectations. Consistent with Frankel,McVay,and S
oliman[2011],our next test of managerial opportunism examines the relation between investor ntiment and the u of pro forma exclusions to meet or beat earnings targets,and whether this relation increas with net insider lling.Wefind that,as investor ntiment increas,managers are more likely to u pro forma exclusions to meet or beat earnings targets when they ll their shares sub-quent to the earnings report date.Notably,wefind that,as investor nti-ment increas,managers’pro forma adjustments are of even lower quality when they ll their shares.Overall,our earnings predictability and insider lling results suggest that the relation between investor ntiment and pro forma disclosure is partly attributable to managerial opportunism.
This study makes two important contributions to the literature.First, while prior accounting rearch has broadly investigated the associa-tion between investor ntiment and corporate disclosure(Bergman and Roychowdhury[2008],Rajgopal,Shivakumar,and Simpson[2007]),we
6N.C.BROWN ET AL.
provide thefirst evidence of the influence of investor and managerial ntiment onfirms’earnings announcement strategies,in particular the type and placement of accounting information disclod in
actual earnings press releas.Second,we extend existing evidence on the relation between ntiment and earnings-related disclosures.Specifically,near the earnings announcement date,Bergman and Roychowdhury[2008]find inconclu-sive evidence of the effect of investor ntiment on management earnings guidance.However,wefind strong evidence that,when earnings announce-ments are imminent,investor and managerial ntiment both play a signif-icant role in the disclosure of pro forma earnings information in corporate press releas.Last,our evidence of potential managerial opportunism has practical implications for regulators and standard tters concerned about the discretionary u of pro forma reporting to influence investor beliefs.
2.Background and Hypothes Development
2.1BACKGROUND
2.1.1.Pro Forma Earnings Disclosure.The managerial practice in recent years of reporting an alternative profitability measure(frequently called “pro forma”earnings)in the quarterly earnings press relea along with the standard GAAP number has generated substantial debate.On the one hand,managers often argue that adjusted earnings measures better portray sustainable“core”performance relative to GAAP earnings,which typically contain transitory or one-tim
e items.On the other hand,critics contend that some managers opportunistically report pro forma earnings measures to influence investor perceptions of futurefirm performance.
In respon to this debate,veral studies examine the determinants of managers’pro forma disclosure decisions as well as investors’respon to al-ternative earnings metrics.Lougee and Marquardt[2004]provide evidence that pro forma disclosure is partly motivated by managers’desire to better portray core earnings performance and that investors pay more attention to pro forma earnings when such information-related motives exist.Sim-ilarly,Bhattacharya et al.[2003]find that investors and analysts perceive manager-adjusted earnings metrics to be more reprentative of core earn-ings than GAAP earnings metrics.Bowen,Davis,and Matsumoto[2005]find that managers tend to place the pro forma earnings metric more prominently within the press relea(relative to the GAAP number)when it provides more value-relevant information and that such prominence in-creas investors’perceptions of the informativeness of pro forma earnings metrics.However,the studies also provide evidence of managerial oppor-tunism.Bhattacharya et al.[2003]and Lougee and Marquardt[2004]find that,in some cas,the disclosure of pro forma earnings metrics is moti-vated by managers’incentives to meet or beat earnings benchmarks and that investors appear to discount pro forma earnings information when such motives exist.Bowen,Davis,and Matsumoto[2005]alsofind that the
