Date of Graduation

5-2020

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level

Graduate

Department

Accounting

Advisor/Mentor

Cory Cassell

Committee Member

Kristian Allee

Second Committee Member

Michael Crawley

Keywords

disclosure bias, geographic segment disclosure, non-GAAP disclosure, segment reporting requirements, strategic disclosure, voluntary disclosure

Abstract

In this study, I examine whether companies are more likely to disclose revenue growth adjusted to remove the effects of foreign currency fluctuations (constant-currency revenue growth rates) when currency fluctuations decrease revenue growth (i.e., there is a currency headwind) than when currency fluctuations increase revenue growth. Public companies increasingly cite non-GAAP performance metrics when announcing earnings. While regulators see value in non-GAAP reporting, they continue to express concern that it is carried out inconsistently and in a misleading manner. Because the disclosure of constant-currency revenue growth is discretionary, companies have an incentive to strategically disclose it only when it benefits them to do so. I first create a novel proxy for the exchange rate impact on revenue and hand collect data on whether or not companies provide constant-currency revenue growth disclosures in earnings announcements. I find that when a company has a currency headwind, it is 146 percent more likely to disclose constant-currency growth rates. In addition, I examine aspects of the information environment and find some evidence suggesting that the effect decreases when information asymmetry is low.

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