Shidler Seminar Series—SOA Guest Speaker Asheq Rahman

Asheq Rahman
Massey University
Friday, February 21, 2014
3:00 pm – 4:30 pm
Shidler College of Business, G301

Reporting and Measurement Inconsistencies, and Composition, and the Relevance of Non-GAAP Earnings of Red Chip Companies

Concerns have been raised about the growth in the use of non-GAAP earnings (NGE) by listed companies because of the nature of their reporting and measurement inconsistencies, and composition. This study examines the relevance of non-GAAP earnings (NGE) reporting in annual reports a less regulated and less intense information environment, the environment of Red Chip companies of the Hong Kong Stock Exchange (HKSE). It also examines the relevance of reporting and measurement inconsistencies, and composition. Red Chip companies are mainland China companies that are controlled directly or indirectly by the Chinese government but listed in the HKSE. The rationale for using these companies is that they are likely to make additional disclosures to attract foreign investment. NGE measures are a form of additional disclosures, and Red Chip companies are primarily listed in the HKSE to seek foreign investment. Our sample consists of 92 non-financial companies from the years 2010 and 2011. We find that adjusted results and EBITDA are common forms of NGE reporting, and tax, interest/financial cost, and gain/loss on investment are the main adjustment items used to derive NGE, not all firms make identical adjustments across years and there are variations in reporting across firms. We find that GAAP earnings (GE) rather than NGE are value relevant. While the form of reporting has no significant association with market returns, adjustment inconsistencies influence the relevance of reported NGE.

Asheq is a Professor of Accounting at Massey University, New Zealand. Prior to joining Massey University, he was an Associate Professor at Nanyang Technological University, Singapore. He teaches and researches in the areas of financial reporting, voluntary disclosure, and international accounting. His research comprises of both theoretical and empirical (archival) studies. He has published in several academic journals, which include Abacus, Accounting, Auditing and Accountability Journal, Accounting and Business Research, Accounting Education, Critical Perspectives in Accounting, The International Journal of Accounting, Journal of Accounting, Auditing and Finance, Journal of Accounting and Public Policy, Journal of Business Ethics, Journal of Information Systems, Journal of International Accounting Research, Journal of International Financial Management and Accounting and Pacific Basin Finance Journal. He is an Editor of Pacific Accounting Review and an ad hoc Co-Editor of the International Journal of Accounting. He is on the editorial boards of several journals including Abacus and International Journal of Accounting. He was also a foundation editorial board member of the Journal of International Accounting Research.