Essays on non-GAAP measures and corporate governance mechanism

Abstract

This dissertation examines non-GAAP measures and corporate governance mechanisms from a multifaceted perspective. In capital markets characterized by information asymmetries, companies complement mandatory reporting with voluntary disclosures such as non-GAAP measures. While these measures may provide decision-useful insights, they may also be used opportunistically, raising questions of transparency and credibility. The dissertation comprises four studies on recent regulatory developments, investor perception, gatekeeping, and mandatory governance reporting. The first study conceptually analyzes Management Performance Measures (MPMs), a concept of non-GAAP measure proposed in the Exposure Draft (ED/2019/7), and contrasts them with existing frameworks, showing substantial alignment with existing regulations and only minor innovations. The second study experimentally examines perceived reporting reliability among professional and non-professional investors in Germany and finds that non-professional investors perceive reports including non-GAAP measures as more reliable, while professional investors remain largely unaffected. The third study examines analysts as capital market gatekeepers for non-professional investors and provides experimental evidence that non-GAAP measures may increase investment judgment, while analysts’ gatekeeping role is especially crucial in cases of opportunistic and non-transparent non-GAAP reporting. The fourth study uses a descriptive text analysis (pre–post) of remuneration reports under ARUG II and documents a substantial increase in report scope but only a slight decline in readability; nevertheless, remuneration reports remain complex overall. Overall, the dissertation contributes to a better understanding of the interdependencies between regulation, disclosure practices, gatekeepers, and investor responses in non-GAAP settings and related governance reporting.