Discussion of “The Predictive Value of Expenses Excluded from Pro Forma Earnings”

Discussion of “The Predictive Value of Expenses Excluded from Pro Forma Earnings” Doyle et al. (2003, this issue) provide evidence that IBES exclusions have incremental explanatory power (over GAAP earnings) for future cash flows, for market-adjusted returns at the earnings announcement date, and for future market-adjusted returns. They argue that this evidence supports the viewpoint that “the current regulatory concern about the use of pro forma earnings may be warranted.” My contention in this discussion is that one can readily posit alternative explanations for each of the empirical results, in turn suggesting that the results do not provide a basis for regulatory concern. Further, since there is considerable evidence that IBES earnings differ from pro forma earnings, it is not clear that the empirical analyzes in this paper may be used to draw any conclusions about pro forma earnings. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

Discussion of “The Predictive Value of Expenses Excluded from Pro Forma Earnings”

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Kluwer Academic Publishers
Copyright © 2003 by Kluwer Academic Publishers
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
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