GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings
Managers, security analysts, investors, and the press rely increasingly on modified definitions of GAAP net income, known by such names as "operating" and "pro forma" earnings. We document this phenomenon and discuss competing explanations for the recent rise in the use of such m...
Gespeichert in:
| Veröffentlicht in: | Journal of accounting research 2002-03, Vol.40 (1), p.41-66 |
|---|---|
| Hauptverfasser: | , |
| Format: | Artikel |
| Sprache: | eng |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Tags: |
Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
|
| container_end_page | 66 |
|---|---|
| container_issue | 1 |
| container_start_page | 41 |
| container_title | Journal of accounting research |
| container_volume | 40 |
| creator | Bradshaw, Mark T. Sloan, Richard G. |
| description | Managers, security analysts, investors, and the press rely increasingly on modified definitions of GAAP net income, known by such names as "operating" and "pro forma" earnings. We document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research. Our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where "GAAP" and "Street" earnings differ. Further, there is a very strong bias toward the reporting of a Street earnings number that exceeds the GAAP earnings number. We also show that the market response to the Street earnings number has displaced GAAP earnings as a primary determinant of stock prices. Finally, through an analysis of earnings releases, we show that management has taken a proactive role in defining and emphasizing the Street number when communicating to analysts and investors. |
| doi_str_mv | 10.1111/1475-679X.00038 |
| format | Article |
| fullrecord | <record><control><sourceid>jstor_proqu</sourceid><recordid>TN_cdi_proquest_journals_206725647</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><jstor_id>3542429</jstor_id><sourcerecordid>3542429</sourcerecordid><originalsourceid>FETCH-LOGICAL-c5538-2ca955a951f4ad0b4c70930f74cf80a71a9725387d8f16b9e4a884945d5273a3</originalsourceid><addsrcrecordid>eNqFUM9v0zAUthBIlMGZCweLezb_jBNu0eg6tolNUIlpF8tNX5hLmmS229H_nheCesXS5yf5--Gnj5D3nJ1yPGdcGZ3lprw_ZYzJ4gWZHV9ekhljgmeF0vlr8ibGDUpKLfmMPCyq6o7uIcRdpMtHoN9TAEifaNXR-XbwwdeupVWMEOMWukT7hi6fe1q1CULnkt8D_QyN73zyfRdHeu5C57uf8S151bg2wrt_84QsL-bL88vs5nbx5by6yWqtZZGJ2pVaI3ij3JqtVG1YKVljVN0UzBnuSiNQaNZFw_NVCcoVhSqVXmthpJMn5OMUO4T-aQcx2U2_w9XaaAXL0Zorg6KzSVSHPsYAjR2C37pwsJzZsT47lmXHsuzf-tBxOTkCDFAf5avWbXoXINq9lU4xvA4Igf3i8AiOGEaO2zy3j2mLUWqKevYtHP73s726rb5NG3yYbJuY-nC0Sa2EEiXS2UT7mOD3kXbhF4ZJjPzxdWEfxJ24uL9eWCH_AEeIoYU</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>206725647</pqid></control><display><type>article</type><title>GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings</title><source>Jstor Complete Legacy</source><source>RePEc</source><source>Wiley Online Library Journals Frontfile Complete</source><creator>Bradshaw, Mark T. ; Sloan, Richard G.</creator><creatorcontrib>Bradshaw, Mark T. ; Sloan, Richard G.</creatorcontrib><description>Managers, security analysts, investors, and the press rely increasingly on modified definitions of GAAP net income, known by such names as "operating" and "pro forma" earnings. We document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research. Our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where "GAAP" and "Street" earnings differ. Further, there is a very strong bias toward the reporting of a Street earnings number that exceeds the GAAP earnings number. We also show that the market response to the Street earnings number has displaced GAAP earnings as a primary determinant of stock prices. Finally, through an analysis of earnings releases, we show that management has taken a proactive role in defining and emphasizing the Street number when communicating to analysts and investors.</description><identifier>ISSN: 0021-8456</identifier><identifier>EISSN: 1475-679X</identifier><identifier>DOI: 10.1111/1475-679X.00038</identifier><identifier>CODEN: JACRBR</identifier><language>eng</language><publisher>Boston, USA and Oxford, UK: Blackwell Publishers Inc</publisher><subject>Accounting ; Acquisitions & mergers ; Analytical forecasting ; Compensation ; Correlation analysis ; Earnings ; Earnings per share ; Efficient markets ; Equity method ; Financial management ; GAAP ; Generally accepted accounting principles ; Goodwill ; Investments ; Investors ; Net income ; Optimism ; P values ; Prices ; R&D ; Rates of return ; Relevant alternatives ; Research & development ; Research & development expenditures ; Stock prices ; Studies</subject><ispartof>Journal of accounting research, 2002-03, Vol.40 (1), p.41-66</ispartof><rights>Copyright 2002 The Institute of Professional Accounting, University of Chicago</rights><rights>University of Chicago on behalf of the Institute of Professional Accounting, 2002</rights><rights>Copyright Institute of Professional Accounting Mar 2002</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c5538-2ca955a951f4ad0b4c70930f74cf80a71a9725387d8f16b9e4a884945d5273a3</citedby></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktopdf>$$Uhttps://www.jstor.org/stable/pdf/3542429$$EPDF$$P50$$Gjstor$$H</linktopdf><linktohtml>$$Uhttps://www.jstor.org/stable/3542429$$EHTML$$P50$$Gjstor$$H</linktohtml><link.rule.ids>314,776,780,799,1411,3994,27901,27902,45550,45551,57992,58225</link.rule.ids><backlink>$$Uhttp://econpapers.repec.org/article/blajoares/v_3a40_3ay_3a2002_3ai_3a1_3ap_3a41-66.htm$$DView record in RePEc$$Hfree_for_read</backlink></links><search><creatorcontrib>Bradshaw, Mark T.</creatorcontrib><creatorcontrib>Sloan, Richard G.</creatorcontrib><title>GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings</title><title>Journal of accounting research</title><description>Managers, security analysts, investors, and the press rely increasingly on modified definitions of GAAP net income, known by such names as "operating" and "pro forma" earnings. We document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research. Our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where "GAAP" and "Street" earnings differ. Further, there is a very strong bias toward the reporting of a Street earnings number that exceeds the GAAP earnings number. We also show that the market response to the Street earnings number has displaced GAAP earnings as a primary determinant of stock prices. Finally, through an analysis of earnings releases, we show that management has taken a proactive role in defining and emphasizing the Street number when communicating to analysts and investors.</description><subject>Accounting</subject><subject>Acquisitions & mergers</subject><subject>Analytical forecasting</subject><subject>Compensation</subject><subject>Correlation analysis</subject><subject>Earnings</subject><subject>Earnings per share</subject><subject>Efficient markets</subject><subject>Equity method</subject><subject>Financial management</subject><subject>GAAP</subject><subject>Generally accepted accounting principles</subject><subject>Goodwill</subject><subject>Investments</subject><subject>Investors</subject><subject>Net income</subject><subject>Optimism</subject><subject>P values</subject><subject>Prices</subject><subject>R&D</subject><subject>Rates of return</subject><subject>Relevant alternatives</subject><subject>Research & development</subject><subject>Research & development expenditures</subject><subject>Stock prices</subject><subject>Studies</subject><issn>0021-8456</issn><issn>1475-679X</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2002</creationdate><recordtype>article</recordtype><sourceid>X2L</sourceid><recordid>eNqFUM9v0zAUthBIlMGZCweLezb_jBNu0eg6tolNUIlpF8tNX5hLmmS229H_nheCesXS5yf5--Gnj5D3nJ1yPGdcGZ3lprw_ZYzJ4gWZHV9ekhljgmeF0vlr8ibGDUpKLfmMPCyq6o7uIcRdpMtHoN9TAEifaNXR-XbwwdeupVWMEOMWukT7hi6fe1q1CULnkt8D_QyN73zyfRdHeu5C57uf8S151bg2wrt_84QsL-bL88vs5nbx5by6yWqtZZGJ2pVaI3ij3JqtVG1YKVljVN0UzBnuSiNQaNZFw_NVCcoVhSqVXmthpJMn5OMUO4T-aQcx2U2_w9XaaAXL0Zorg6KzSVSHPsYAjR2C37pwsJzZsT47lmXHsuzf-tBxOTkCDFAf5avWbXoXINq9lU4xvA4Igf3i8AiOGEaO2zy3j2mLUWqKevYtHP73s726rb5NG3yYbJuY-nC0Sa2EEiXS2UT7mOD3kXbhF4ZJjPzxdWEfxJ24uL9eWCH_AEeIoYU</recordid><startdate>200203</startdate><enddate>200203</enddate><creator>Bradshaw, Mark T.</creator><creator>Sloan, Richard G.</creator><general>Blackwell Publishers Inc</general><general>The Institute of Professional Accounting, Graduate School of Business, University of Chicago</general><general>Wiley Blackwell</general><general>Blackwell Publishing Ltd</general><scope>BSCLL</scope><scope>DKI</scope><scope>X2L</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>200203</creationdate><title>GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings</title><author>Bradshaw, Mark T. ; Sloan, Richard G.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c5538-2ca955a951f4ad0b4c70930f74cf80a71a9725387d8f16b9e4a884945d5273a3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2002</creationdate><topic>Accounting</topic><topic>Acquisitions & mergers</topic><topic>Analytical forecasting</topic><topic>Compensation</topic><topic>Correlation analysis</topic><topic>Earnings</topic><topic>Earnings per share</topic><topic>Efficient markets</topic><topic>Equity method</topic><topic>Financial management</topic><topic>GAAP</topic><topic>Generally accepted accounting principles</topic><topic>Goodwill</topic><topic>Investments</topic><topic>Investors</topic><topic>Net income</topic><topic>Optimism</topic><topic>P values</topic><topic>Prices</topic><topic>R&D</topic><topic>Rates of return</topic><topic>Relevant alternatives</topic><topic>Research & development</topic><topic>Research & development expenditures</topic><topic>Stock prices</topic><topic>Studies</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Bradshaw, Mark T.</creatorcontrib><creatorcontrib>Sloan, Richard G.</creatorcontrib><collection>Istex</collection><collection>RePEc IDEAS</collection><collection>RePEc</collection><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of accounting research</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Bradshaw, Mark T.</au><au>Sloan, Richard G.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings</atitle><jtitle>Journal of accounting research</jtitle><date>2002-03</date><risdate>2002</risdate><volume>40</volume><issue>1</issue><spage>41</spage><epage>66</epage><pages>41-66</pages><issn>0021-8456</issn><eissn>1475-679X</eissn><coden>JACRBR</coden><abstract>Managers, security analysts, investors, and the press rely increasingly on modified definitions of GAAP net income, known by such names as "operating" and "pro forma" earnings. We document this phenomenon and discuss competing explanations for the recent rise in the use of such modified earnings numbers and implications for the interpretation of related accounting research. Our results show that over the past 20 years there has been a dramatic increase in the frequency and magnitude of cases where "GAAP" and "Street" earnings differ. Further, there is a very strong bias toward the reporting of a Street earnings number that exceeds the GAAP earnings number. We also show that the market response to the Street earnings number has displaced GAAP earnings as a primary determinant of stock prices. Finally, through an analysis of earnings releases, we show that management has taken a proactive role in defining and emphasizing the Street number when communicating to analysts and investors.</abstract><cop>Boston, USA and Oxford, UK</cop><pub>Blackwell Publishers Inc</pub><doi>10.1111/1475-679X.00038</doi><tpages>26</tpages><oa>free_for_read</oa></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 0021-8456 |
| ispartof | Journal of accounting research, 2002-03, Vol.40 (1), p.41-66 |
| issn | 0021-8456 1475-679X |
| language | eng |
| recordid | cdi_proquest_journals_206725647 |
| source | Jstor Complete Legacy; RePEc; Wiley Online Library Journals Frontfile Complete |
| subjects | Accounting Acquisitions & mergers Analytical forecasting Compensation Correlation analysis Earnings Earnings per share Efficient markets Equity method Financial management GAAP Generally accepted accounting principles Goodwill Investments Investors Net income Optimism P values Prices R&D Rates of return Relevant alternatives Research & development Research & development expenditures Stock prices Studies |
| title | GAAP versus The Street: An Empirical Assessment of Two Alternative Definitions of Earnings |
| url | https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2025-02-18T09%3A44%3A04IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-jstor_proqu&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=GAAP%20versus%20The%20Street:%20An%20Empirical%20Assessment%20of%20Two%20Alternative%20Definitions%20of%20Earnings&rft.jtitle=Journal%20of%20accounting%20research&rft.au=Bradshaw,%20Mark%20T.&rft.date=2002-03&rft.volume=40&rft.issue=1&rft.spage=41&rft.epage=66&rft.pages=41-66&rft.issn=0021-8456&rft.eissn=1475-679X&rft.coden=JACRBR&rft_id=info:doi/10.1111/1475-679X.00038&rft_dat=%3Cjstor_proqu%3E3542429%3C/jstor_proqu%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=206725647&rft_id=info:pmid/&rft_jstor_id=3542429&rfr_iscdi=true |