The Risk-Relevance of Non-GAAP Earnings

  • Thu 19 Oct 17

    14:00 - 16:00

  • Colchester Campus


  • Event speaker

    Dr Kalin Kolev

  • Event type

    Lectures, talks and seminars
    Essex Accounting Centre

  • Event organiser

    Essex Business School

Essex Accounting Centre is delighted to welcome Dr Kalin Kolev to our weekly seminar series to present his paper, titled 'The Risk-Relevance of Non-GAAP Earnings'.

Event abstract

We examine the risk-relevance of non-GAAP earnings for equity and credit markets. Existing research extensively explores non-GAAP earnings and firm valuation but leaves the informativeness of non-GAAP earnings with respect to firm risk, i.e. the denominator of the valuation equation, unexplored. We find non-GAAP earnings are more equity risk-relevant than GAAP earnings.  Other exclusions are more equity risk-relevant than special item exclusions before Reg G, but special item exclusions increase in relevance after Reg G and become as equity risk-relevant as other exclusions.  Before Reg G, non-GAAP earnings are more credit risk-relevant than GAAP earnings, but the difference is driven by special item exclusions. After Reg G, other exclusions and especially special item exclusions increase in credit risk-relevance such that non-GAAP earnings is not more credit risk-relevant than GAAP earnings.  Overall, our results suggest non-GAAP disclosures improve the general risk-relevance of earnings, but more so for equity capital suppliers than for credit capital suppliers, and that Reg G resulted in the exclusion of more risk-relevant earnings components in special items.

Speaker biography

Dr Kalin Kolev is Associate Professor of Accounting at Baruch College, City University of New York (USA). His research interests relate to financial accounting and reporting, with capital markets and governance overtones. Past and ongoing work focuses on fair value accounting, special items and non-GAAP metrics, earnings management, non-executive compensation, credit default swaps, and risk. His work is published in top journals such as The Accounting Review and Cotemporary Accounting Research.

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