Congratulations to Prof. Charles HSU for the paper at Journal of Accounting and Economics
13 Oct 2022

HSU, CHARLES, Wang, Rencheng and Whipple, Benjamin. (2022) “Non-GAAP Earnings and Stock Price Crash Risk " Journal of Accounting and Economics, 73, Issues 2-3, April-May, 101473.


We investigate whether non-GAAP earnings disclosures increase stock price crash risk. Consistent with non-GAAP disclosures allowing managers to inflate investors’ perceptions about firm performance, our results indicate that income increasing non-GAAP reporting increases crash risk. We also find that managers can use non-GAAP reporting as a substitute for earnings management to withhold bad news from investors (the traditional explanation for crashes). Finally, we find a positive association between non-GAAP reporting and the likelihood of subsequent events that can trigger a crash. Overall, our evidence is consistent with some non-GAAP disclosures exposing investors to risks of large and sudden price declines.

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