Showing papers in "Journal of Accounting and Finance in 2017"

Risks Management Application in Helping the Poor Through Microfinancing

Abstract: Risks Management Application in Helping the Poor Through Microfinancing by Edmond Njombe Lyonga MS, Mountain State University, 2012 BS, Mountain State University, 2010 BSC, Buea University, 2004 Dissertation Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy Management—Finance

Financial Literacy among Women - Indian Scenario

Abstract: One of the biggest challenges of our country is women empowerment which can only be attained by making women educated, finance liberated and independent. Financial literacy can be understood as the ability to know how money works in a normal course of action. Specifically it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. In India, virtually women are the main spender of the family whereas the men are the principal earner of the family. Although women's access to financial services has increased substantially faster in the past 10 years, their ability to exploit this access is often still limited by the disadvantages they experience because of their gender. Women are good at budgeting and managing household expenses but many women take their steps back when it comes to take larger financial decisions and they generally leave it to their spouses, fathers, brothers, etc, believing them to be financial experts. A minimum basic level of financial literacy is very essential for every woman so that they can live their life according to their own choices hence contributing the healthy and prosperous life of their family as a whole. Women have enormous potential to contribute towards the growth of the economy hence a financially independent women can be a great source of economic development. The purpose of this study was to give an overview about the financial literacy among women in developing country like India.

Effect of audit committee expertise and meeting on earnings quality in Indonesian listed companies: a conceptual approach

Abstract: Purpose: The purpose of this paper will focus on monitoring and improving corporate governance through earnings quality. In particular, audit committee effectiveness is seen as a significant factor in ensuring effective corporate governance and in view of this, the aim of this paper is to develop a conceptual framework that will examine the impact expertise, meeting and meeting attendance on the earnings quality of companies. Methodology: Future empirical studies could be conducted quantitatively with secondary data. The report from annual reports of companies listed in Indonesia Stock Exchange (IDX) starting from the period of implementation of the new code on implementation guideline in 2013. Implication: In fact, the main issue was centered on financial reporting manipulations and there is need to examine and develop a mechanism that in addition, agency theory is expected to explain the above three factors in providing explanation to accounting information that relates to the earnings quality under study. Finally, it is expected that future empirical studies with this conceptual framework can enhance earnings quality for users of financial statements such as: investors, creditors, shareholders and other stakeholders in Indonesia and beyond.

Effect of Dividend Policy on Share Price Performance: A Case of Listed Insurance Companies at the Nairobi Securities Exchange, Kenya

Abstract: The purpose of this study was to determine the effect of dividends policy on share price performance of insurance companies listed at the Nairobi Securities Exchange (NSE). This study was guided by the following objectives: to determine the effect of dividend payout on share price performance of insurance companies listed at the Nairobi Securities Exchange (NSE), to examine the effect of dividend yield on share price performance of insurance companies listed at the Nairobi Securities Exchange (NSE), to analyze the effect of earnings per share on share price performance of insurance companies listed at the Nairobi Securities Exchange (NSE) and to determine the effect of inflation on share price performance of insurance companies listed at the Nairobi Securities Exchange (NSE). This study was underpinned by two theories namely; Modigliani and Miller, and Gordon's Model. This study adopted a combination of descriptive design and historical research design. The target population was six insurance companies listed at the Nairobi Securities Exchange namely; Jubilee holdings ltd, Pan Africa Insurance holdings, Kenya Re-Insurance Corporation limited, Liberty Kenya Holdings, British American Investment company ltd and CIC Insurance groups. Secondary data was collected from the companies’ past financial reports for ten year period between 2006-2015. Panel data was evaluated and analyzed using stata. Dynamic regression analysis was used to establish the relationship between dividend policy on share price of the listed insurance companies. This study established that dividend payout, dividend yield, earnings per share and inflation are jointly significant in predicting the value of share price. Therefore the study recommended that insurance firms should consider their dividend policy accurately since they have a great power on influencing share price, because they affect share price by making stocks prices move either up or down depending on dividends announced by management hence management should be prudently responsive in declaring dividends. Further, the study recommended that management of insurance firms should strive to declare higher dividends to spur share price upwards. The findings of this study benefits insurance firms and regulators like CMA, IRA and NSE in decision making. Further studies to be conducted regarding dividend policy on share price with expanded time frame on all listed companies at NSE.

Effect of Behavioural Biases on Investments at the Rwanda Stock Exchange

Abstract: The main objective of this study was to establish the effect of behavioural biases on investment in the Rwanda Stock Exchange. The specific objectives were to establish the effects of self-serving bias, over-optimism bias, loss aversion, self- attribution bias and confirmatory bias on investment in the Rwanda stock exchange. The prospect theory, heuristics theory and herding theory formed the foundation of this study. The underlying epistemology of this research was positivist; focusing on examining earlier established theories under the assumption that reality is objectively given and can be described by measurable properties independent of the observer and the instruments. The study used cross-sectional descriptive survey research design to ascertain and establish the effect of behavioural biases on investment in the Rwanda stock exchange. The target population comprised of 13,543 individual, group investors at the Rwanda Stock Exchange. Random sampling was used where the targeted population was individual investors to finally yield a sample size of 374 respondents. A questionnaire was used to collect the primary data. Data analysis involved the use of descriptive and inferential statistics. A linear regression model was used to predict the probability of different possibility outcomes of dependent variables, helping to predict the probability of an investor to invest in Rwanda Stok Exchange. The results confirmed that there was a significant positive linear relationship between self-serving bias, over-optimism bias, loss aversion bias, self-attribution bias, confirmatory bias and Investment in Rwanda stock market. The study also concluded that most investors suffered from behavioural biases in investment in stock markets. The study further recommends that the individual investors to seek the advice of stock brokers/fund managers to advise them accordingly in terms of performance of a specific security in which an investor would wish to invest in.

Financial Inclusion Fosters Growth: Simple Multiplier and "AK" Growth Model Analysis

Abstract: This study clearly demonstrates analytically that financial inclusion as the aim of a supply leading strategy of financial development model can clearly create faster growth. Firstly, a multiplier model is used to demonstrating as to how financial inclusion creates more output than in case of a demand following model of financial development. Secondly, the most popular “AK” growth model framework is used to analytically demonstrating the superiority of financial inclusion in creating faster growth. Thirdly, with simple algebra of the well-known Harberger little triangle and rectangle, the superiority of financial inclusion is numerically demonstrated as an integral component of the supply leading financial development strategy.

Effect of Debt Finance on Financial Performance of Savings and Credit Cooperative Societies in Maara Sub-county, Tharaka Nithi County, Kenya

Abstract: Debt financing is the acquisition of funds through borrowing. Most Sacco’s results into borrowing to finance their increased customer’s demands thus increasing the leverage if not controlled. This study determined the effects of debt finance on financial performance measured ROE. The study investigated the effect of interest rate, loan tenure, debt/equity ratio, and interest coverage ratio on financial performance of savings and credit cooperative societies in Maara Sub-County, Tharaka Nithi County, Kenya. Causal research design and a target population of 10 Sacco’s and census survey were used. Secondary data from the Saccos financial statements for the last eight years used. Descriptive and inferential statistics were used with help of Statistical Package for Social Sciences (SPSS) and results presented in tables. A strong positive relationship of 0.984 between debt and ROE was revealed. A negative relationship existed between interest rate, loan tenure and ROE while a positive relationship was revealed between debt equity ratio and interest coverage ratio on ROE respectively. Interest rate, loan tenure and debt equity ratio had significant effect on ROE at t-statistics of 3.474, -2.938, 9.217 and 8.728 respectively with their P-values 0.018, 0.032, 0.000 and 0.000 less than 0.05 respectively.

Sustainability Reporting by Firms in the Nigerian Economy: Social versus Environmental Disclosure

Abstract: Purpose: There is need for specialization on individual categories of sustainability information disclosure. An attempt has been made in this study to make a comparison between the environmental and social categories of sustainability disclosure. Methodology: Guided by the G4 sustainability reporting guidelines, environmentally sensitive companies in the Nigerian economy were analyzed for 6 years (2009-2014). Separate assessments and comparisons were made between environmental reporting and social reporting on the impact, influence and significance of their relationships using Stata13SE analytical tool. Findings: The results shows that firms performed better on social reporting than on environmental reporting in terms of higher sustainability disclosure rates and significant relationships. Research Implications: The current trend of reporting sustainability information disclosure under both social and environmental reporting is encouraging considering the fact that disclosure on sustainability issues in Nigeria is voluntary. Practical Implications: Firms in environmentally sensitive sectors are disclosing sustainability information than expected. Originality/Value: The uniqueness in comparing sustainability disclosures between environmental information and social information.

Model Building and Forecasting of Bank Credit to Public and Private Sector

Abstract: In this research the data comprises of the bank credit to public and private sector from 1983 to 2013. The main objective of the research is to select suitable model for the bank credit to public and private sector. For analysis purpose E-views version 5 has been used. First of all stationarity of the series has been checked and it is observed that the series of bank credit to public sector is stationary at first difference and series of bank credit to private sector is stationary at second difference. For identification of suitable ARIMA model correlogram has been performed and a class of models has been estimated. Most appropriate model is selected by applying different diagnostic checks and comparing several descriptive measures. Finally forecast has been made for the year 2014.

Moderating effect of internal control system on the relationship between environmental turbulence and firm performance in Jordanian listed companies

Abstract: Purpose: The purpose of this paper is to investigate the impact of environmental turbulence on firm performance of listed companies in Jordan. A conceptual model is proposed in this paper where firm performance is expected to be influenced by a two-dimensional environmental turbulence factor (technological turbulence and market turbulence) with a moderating factor of internal control system. Proposed Method: A questionnaire survey would be administered to 253 listed companies in Amman stock Exchange and analysis could be done with Partial Least Square (PLS) for testing the hypotheses of the study that firm performance is being influenced by environmental turbulence with a moderating effect of internal control system. Expected Results: It expected that when this proposed conceptual model is used with empirical data, the result of the research will provide a good understanding of the influence of the two environmental turbulence factors (technology and market) on firm performance of Jordanian listed companies. The result will also highlight the extent of the moderating effect of internal control system on the relationship between environmental turbulence and firm performance. Implication: Even though this research paper only presents a conceptual framework, but it proposes an aspect that needs to be tested with empirical data among Jordanian listed companies because of their significance in the business environment and the Jordan’s economy as a whole. The study is also of particular importance to the management of listed firms in knowing the moderating role of their internal control system on the relationship between the environmental turbulence and firm performance.

Impact of the Corporate Governance and the Ownership Structure on the Firm’s Financial Performance and its Risk Taking Behavior

Abstract: Purpose: In the developing country like Pakistan the agency problem may have different dimensions as it may not only be among the ownership and the management but also regarding the expropriation of the corporate profits by the largest shareholder at the cost of the many small shareholders. This paper examines the relationship between the Ownership Structure with its two dimensions i.e. Ownership Type and Concentration with the Corporate Governance adaptation level by the firms and its Financial Performance and Risk Taking Behavior judged by the Stock Market Returns.Methodology: The analysis was conducted in three sections using Panel Data Estimation using the data from 2006 to 2010 for 40 listed KSE firms.Findings: The results indicates that the improvement in the Corporate Practices increase the firm’s financial performance and reduction in the level of risk during undertaking of the riskier ventures. The Corporate Governance also has negative relationship with the Ownership Concentration proving the fact that the increase in the level of the ownership concentration results in the reduction of the level of good practices by the firms.Practical Implications: These results also provided a view of the Corporate Structure of the Pakistani firms and prove the fact that the Ownership Concentrated in single largest owner results in the reduction of Corporate Governance level and the Financial Performance of the firms and also results in the increase in the level of the risk undertaken by the firms.

Impact of Basel III framework on financial distress: A case study of Pakistan

Abstract: Purpose: New liquidity rules phased under the Basel lll define the new stable funding ratios (NSFR) increase the stability of the funding structure of the financial institution Using a Pakistani banking data, we tested the relevance of both Structural liquidity and Capital ratios as defined in the Basel lll We used the broad definition of the failure and distress to check the status of the banking sector If the banks fail, then it denoted by 1 otherwise 0 We use the logistic regression in our study Estimate from several versions of the logistic probability model indicate that the likelihood of failure and distress decrease with increase liquidity holding while capital ratios are not significant Our result provides support for the Basel lll that the NSFR has the inverse relation with the bank failure and distress This study also compared the two versions of the NSFR NSFR-10 and NSFR-14 are the two versions Our analysis tells that the NSFR-14 is more reliable as compare to the NSFR-10 We also check the bank situations whether it lies in the failure and distress condition or in active banks In this study we also check the other variables that have an important impact on the stability and failure and distress of the banks

Taming Leviathan: Mitigating Political Interference in Sovereign Wealth Funds Public Equity Investments

Abstract: Extant research finds that announcement-period abnormal returns of sovereign wealth fund (SWF) equity investments in publicly traded firms are positive but lower than those of comparable private investments. We investigate the determinants of this “SWF discount” and mitigating mechanisms. We find that the discount is deeper for domestic investments and for SWFs from non-democratic countries, suggesting it is caused by the threat of political interference. While SWFs from non-democratic countries experience larger discounts, lower profitability, and lower valuation when signaling an active stance (buying large stakes, acquiring control, and investing directly), the opposite is true for SWFs from democratic countries.

Empirical Study of the Relationship between Board of Director Mechanisms and Perceived Performance of Listed Firms in Nigeria

Abstract: Purpose: The growing debate on the board of director mechanisms to firm performance will for a long time remain area of research. The effectiveness of the board of director composition, responsibility, and accountability have become an area of research in the recent trend. This paper attempts to investigate the empirical study of the relationship between the board of director mechanisms and perceived performance of listed firms in Nigeria. The underpinning theory of the paper is rooted in agency theory and supported by resource dependence theory, and stewardship theory to increase the understanding of the influence of the board of director formation to perceived firm performance. The questionnaires were administered to the respondents, out of 182 questionnaires administered, 117 were returned. The number of valid questionnaires is 114. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). Empirical findings showed that board of director composition and accountability were positively associated with perceived firm performance. While the board of director responsibility has no relationship. Based on the knowledge of this paper, this is the first study that adopts the use of primary data to investigate the empirical study of the relationship between the board of director mechanisms and perceived performance of listed firms in Nigeria. The findings provide policymakers, stakeholders, and government with the approaches to overcome and resolved the conflict of interest between the board of director (agent) and shareholder (principal). The paper also offers some suggestions for future study.

The Impact of Capital Structure on Banks’ Profitability in Africa

Abstract: This paper investigates the impact of capital structure on the profitability of banks in Africa. Using dynamic panel regression robust analysis and data from 37 countries in SSA, the study employed the Debt Ratio (DR) as a measure of capital structure; whereas banks’ profitability was measured using Risk Adjusted Return on Asset (RAROA), Risk Adjusted Return on Equity (RAROE) and Net Interest Margin (NIM). The findings suggest that, banks’ capital structure is a driver of profitability. Other variables that significantly influence banks’ profitability are size, tangible asset, growth, taxes and interest rate.

Determinants of Quality Accounting Information Disclosure

Abstract: Purpose: This study aims at examining the factors determining the quality of accounting information disclosure in Nigerian firms. The study made use of secondary data obtained from the Nigerian stock exchange. Ordinary least square regression technique was used to test the hypothesis for this study. The study found a positive relationship between firm size and disclosure quality. Institutional ownership, firm performance and earnings per share also had a positive relationship with disclosure quality. Firm leverage was found to have a negative relationship with disclosure quality. This study recommends that firms should introduce the idea of institutional ownership and also leverage usage should be minimized.

A Rising Market and Capital Structure Decisions

Abstract: This paper examines capital structure decisions in the 1990s. We test a number of capital structure theories and find notable differences between investment- and junk-grade issuers in this period. Consistent with the trade-off theory, 67% of junk-grade issues were equity as opposed to only 9% of investment-grade issues. In addition, consistent with the trade-off theory, for junk-grade issuers, we find a direct relationship between collateral and debt issuance and an inverse relationship between debt issuance and the treasury yield. However, contrary to the predictions of the trade-off theory, we do not find similar evidence for investment-grade issuers. Moreover, our analysis suggests that junk-grade issuers are concerned with the wealth-transfer consequences of choosing equity over debt; this does not seem to be the case for investment-grade issuers. We find some evidence in support of market timing and little evidence for the pecking order theory or the equity undervaluation hypothesis.

Role of Equb in Financing Micro and Small Business Enterprises in Konso

Abstract: The aim of this study was to assess the role of Equb in Micro and Small Business Enterprises finance in Konso For this purpose, data was collected through questionnaire from Equb members as well as interviewing with Equb organizers and non Equb MSE owners The respondents were selected using both proportionate stratified and random sampling techniques Besides, the collected data were analyzed using descriptive narrations through concurrent triangulation strategy The result revealed that, People joined Equb to dig up large amount of money, save and even get loans at the lowest interest Banks/Micro Finance Institutions fail to cater for the saving and credit needs of poor and small business holders, mainly due to their lending terms and conditions of creating financial gap which informal financial institutions try to fill In Konso, Equb dominates other sources in the finance establishment of Micro and Small Enterprises, expansion and their working capital finance, followed by personal saving, families and relatives

Effect of IFRS Adoption on Corporate Performance Measurement: Analysis of Japanese Manufacturing Companies

Abstract: The International Financial Reporting Standards (IFRS) are becoming the leading principles and a special driver for the convergence of financial and management accounting in over 130 countries including the voluntary adoption. The purpose of this study is to examine the impact of the adoption of IFRS on management accounting. More specifically, this study investigates the differences in the importance of strategy goals, and financial and nonfinancial measures that have changed after its adoption. The results of a questionnaire survey conducted on Japanese manufacturing companies indicate that the effects of respondent firms provide with management accounting practices and techniques before and after the adoption of IFRS. My findings suggest that there seem to be considerable differences in the importance of strategy goals, and financial and nonfinancial measures before and after IFRS adoption.

Characteristics of Firms with Material Weaknesses in Internal Control: An Empirical Analysis

Abstract: The two million fake accounts opened by Wells Fargo employees have underscored the importance of internal controls in recent times. We examine a sample of 395 MWIC firms matched with a sample 395 control firms in the same industry. The univariate test results indicate that the MWIC firms have significantly lower gross margins and are smaller when compared to control firms. The logistic regression results indicate that the total assets turnover ratio, current ratio, audit opinion and the size measure are significantly different between the two groups. Tobin’s Q and capital intensity measures are marginally different between the two groups.

Alternative Models for the Conditional Heteroscedasticity and the Predictive Accuracy of Variance Models Empirical Evidence from East and North Africa Stock Markets

Abstract: Using empirical evidence from East and North Africa Stock Markets, this paper examines and compares alternative distribution density forecast methods of three generalised autoregressive conditional heteroscedasticity (GARCH) models. We employed the symmetric GARCH, Glosten Jagannathan and Runkle version of GARCH (GJR-GARCH) and Exponential GARCH methods to investigate the effect of stock return volatility using Gaussian, Student-t and Generalised Error distribution densities. The results show that the use of GJR and EGARCH with non-normal distribution densities appear justified to model the asymmetric characteristics of both indices. The evidence so far shows that in both markets, negative shocks would generally have a greater impact on future volatility than positive shocks, confirming the existence of leverage effect. The presence of leverage effect suggests that investors in these markets should be rewarded for taking up additional leverage risk as a fall in equity value (resulting from volatility) would mean a rise of debt to equity ratio and therefore, increase in financial distress risk. With respect to forecasting evaluation, the results indicate that clearly, symmetric GARCH model completely dominates the others in Kenya, while both GARCH and EGARCH best capture the Tunisian market.

Effect of Comparative Study of Payment System between Malaysia and Republic of Tajikistan

Abstract: Purpose: The worldwide payment system has another alternative called e-payment system now. There are a numbers of different aspects on payment system in two mentioned countries. To utilize the arrangement of e-payment, we can spare our time, assets and powers throughout our day by day to exercise the daily e-payment method. The larger part of developing nation is utilizing this e-payment system these days, on the grounds that the e-payment will push the economy to drive speedily. Author has used quantitative method data collection, whereby questionnaire will be provided to respondents. The populations for this research study are financial organizations in both of countries. The target markets are 59 organizations and for data analyzing author will use SPSS technique. Today, the structure of payment system is electronic-payment systems. It is believed that the result of this study significantly support e-payment system. Using cash, cheque and other kind of payment methods are very less observed in Malaysia. Author has tried to find what are the comparative aspects of payment system between two countries and what are the benefit of e-payment system which used in Malaysia and unused in Tajikistan. This study will help the payment system of Tajikistan to develop and transform to new payment system accordingly. Therefore, this research will deliver as educational subject and training courses to the Republic of Tajikistan.

The strategic role of Non-audit Services in Audit Markets

Abstract: There has been an extensive debate about whether the joint provision of audit and non-audit services (NAS) impairs auditor independence and objectivity. Literature suggest that joint delivery of the audit and NAS may generate knowledge spillover effects that could lead to economic rents, integrity and increased audit quality. We model that markets are better off when audit firms provide NASs together where firms are indifferent between the benefits of economic rents and the independence costs. The findings have implications for audit profession, regulators and policy makers such as PCAOB deliberation over whether additional NAS should be banned or relaxed for auditors.

Accounting Conservatism and its Benefits to Shareholders in Developing Capital Market: Evidence from Nigeria

Abstract: This study investigated the relationship between accounting conservatism and shareholders value of selected quoted companies in Nigeria. The proxy for accounting conservatism was asymmetric accrual to cash-flow (AACF) and shareholders fund was the proxy for shareholders value. Exchange and inflation rates were included as control variables. This study adopted ex-post facto research design. The population of the study was all quoted companies on the Nigeria Stock Exchange from which a sample of 20 companies was chosen using judgmental sampling technique. Secondary data was obtained from annual report and accounts of the sampled companies for a period of ten years (2006 to 2015). Multiple regression analysis was used to analyze the data collected. The hypothesis was tested using F-Statistic. The result of the study revealed existence of a significant positive relationship between accounting conservatism and shareholders value with F-statistic p-value of 0.016 for all our explanatory variables. This result was validated with robustness checks and it was discovered that the relationship between conservatism and shareholders value was high for firms with higher information asymmetry. The finding implies that accounting conservatism is an efficient governance mechanism to mitigate information risk and control for agency problems. Hence, we concluded that shareholders derive benefits from accounting conservatism practice in Nigeria.

DEMATEL and Analytic Network Process for Evaluating Stock Trade Strategies Using Livermore's Key Price Logic

Abstract: Jesse L. Livermore was one of the World’s greatest stock traders on Wall Street in the early twentieth century. He was also regarded as “the most fabulous US stock trader” by Time magazine. This study combined Livermore’s financial key price logic with the decisionmaking trial and evaluation laboratory (DEMATEL) and analytic network process (ANP) methods (D-ANP). This investigation attempted to find the key factors and their causeeffect relationships. This study then combined the key factors with Livermore’s key price logic to develop two strategies for forecasting the trend in the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX). This work also compared these two strategies with another strategy that did not incorporate Livermore’s logic in order to determine the optimum strategy. This study then compared the return using the optimum strategy with that based on TAIEX futures during the test period. The process was performed as follows: First, integrated questionnaires were distributed to 12 financial experts on Taiwan’s stocks and futures markets in order to select 3/7 key factors that might affect Taiwan’s stock markets. (i.e., “net buying/selling volume by foreign institutional investors”, “total market trading volume,” “predictions of future trends by foreign institutional investors”). The key factors were incorporated into Livermore’s key price logic to develop two trading strategies (Strategies A and B). In addition, Strategy C was simply developed using the D-ANP method and the three factors selected by financial experts. The major variables considered by Livermore (uptrend and downtrend) were not selected as the key factors by the financial experts, so Strategy C did not incorporate Livermore’s logic. Ten transactions were examined during the period from January 1, 2013 to December 31, 2014 (the pre-test period), and only Strategy C was found to be effective because its winning percentage (WP) exceeded 50% (60%), whereas Strategies A and B had WPs less than 50% (30% each). Eight adjustments were then made to Strategy C to develop an amended Strategy C. The amended Strategy C was then tested against TAIEX futures during the period from January 1, 2015 to June 30, 2015 (test period). The empirical result obtained demonstrated that the amended Strategy C performed better than TAIEX futures during both periods (pre-test period and test period), as well as outperforming Strategies A and B, which were developed based on Livermore’s key price logic.

Managerial Reputation and the Quality of Non-GAAP Earnings Disclosures

Abstract: Motivated by the efficient contracting theory and managerial reputation incentives, this study examines how managerial reputation affects the quality of non-GAAP earnings disclosures. Using empirical models, the study finds that reputable managers are less likely to disclose non-GAAP earnings, which is consistent with the efficient contracting explanation. The study also finds that reputable managers exclude more recurring items that are related to future operating earnings when they disclose non-GAAP earnings, which is consistent with the rent extraction explanation. The study contributes to both nonGAAP earnings disclosures literature and managerial incentives literature. It also has implications for investors, managers, and regulators.