Are Investors Misled by “Pro Forma” Earnings?
نویسندگان
چکیده
This paper documents the frequency and magnitude of “pro forma” earnings in press releases issued during June through August 2000 and describes the 433 firms that engaged in this financial disclosure strategy. We then use a market multiples approach to determine if investors assign a higher (or lower) share price to pro forma firms than other firms. We find no evidence that pro forma firms are priced differently than other firms. We also find no evidence of a stock return premium (or penalty) at the quarterly earnings announcement date for pro forma firms. Collectively, our results provide evidence that investors are not, on average, misled by pro forma earnings disclosures.
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