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after the implementation of C&DIs. The incidence of using opportunistic special items
to meet or beat analysts’ earnings forecasts by firms reporting non-GAAP earnings also
significantly decreases in the post-C&DIs period. These results are robust to a variety of
alternative research designs. Moreover, an additional analysis indicates that the reduction
in the recognition of opportunistic special items is more pronounced in firms that report
a loss under GAAP. These findings complement prior research, supporting that a less
stringent regulation on non-GAAP earnings disclosures will reduce firms’ incentives to
pursue aggressive earnings management.
Hsiou-Wei Lin
San-Lin Chung
Chih-Ping Wei
