2020/07/28 by Ahmed Abdel-Meguid, Ahmed M. Abdel‐Meguid, Jared N. Jennings +2 · 91 citations
Business, Management and Accounting · Psychology · #Accounting #Auditing, Earnings Management, Governance #Business #Corporate Finance and Governance #Corporate Taxation and Avoidance #Discretion #Earnings #Earnings management #Earnings quality #Economics #Finance #Flexibility (engineering) #Narcissism #Order (exchange) #Political science #Psychology #Quality (philosophy) #Social psychology
paper · doi:10.2308/tar-2017-0612
published in The Accounting Review 96(3), 1-25 (American Accounting Association)
openalex publication_date 2020/07/28 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/26
ABSTRACT Non-GAAP earnings provide managers the flexibility to exclude GAAP items to either produce a more informative performance measure or provide them the ability to opportunistically exclude recurring expenses from non-GAAP earnings. Prior literature examines the use of this form of disclosure at the firm level, although it is ultimately management's decision. We extend prior non-GAAP literature by examining whether the use and quality of non-GAAP earnings is influenced by CEO personality traits, namely, CEO narcissism. We find that narcissistic CEOs are more likely to exclude expenses from non-GAAP earnings and that the magnitude of exclusions is greater. We also find that those non-GAAP exclusions are more persistent and, thus, lower-quality. Our results shed light on the disclosure practice of non-GAAP earnings and show how narcissistic CEOs are more likely to take advantage of the discretion in financial reporting disclosures in order to benefit the firm and themselves.