Researcher ORCID Identifier

0009-0000-7452-5289

Graduation Year

2025

Date of Submission

4-2024

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Gary Birkenbeuel

Abstract

The increasingly controversial debate on the disclosure of non-GAAP reporting has become a widely discussed topic in financial reporting, raising questions about transparency and investor perception. This thesis investigates how non-GAAP metrics influence investor decision-making and stock market reactions during earnings announcements. Using a panel data regression across 30 publicly traded companies in the technology, retail, and entertainment sectors over an 8-year period, the study analyzes the effects of non-GAAP net income and earnings per share reporting on stock trading volume and stock price. The results reveal that non-GAAP disclosures have a limited impact on trading volume, with none of the tested variables yielding statistically significant results. However, stock price responses reveal more meaningful trends. Non-GAAP net income has a statistically significant positive effect on stock price, suggesting that investors reward firms reporting stronger adjusted profitability. Non-GAAP EPS also shows a positive, though less consistent, impact. Notably, companies disclosing a more non-GAAP metrics experience a significant decrease in stock price, indicating possible investor skepticism toward overly adjusted reporting. These findings suggest that while select non-GAAP metrics can enhance investor confidence, overuse may undermine credibility. As regulators such as the SEC and FASB consider stricter guidelines, this research highlights the evolving role of non-GAAP reporting in shaping investor behavior.

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This thesis is restricted to the Claremont Colleges current faculty, students, and staff.

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