R Narayanaswamy

Document Type

Working Paper

Abstract

Indian companies use non-GAAP financial measures in addition to GAAP measures. Unlike GAAP measures, non-GAAP measures are not defined well. This creates conditions for managers to use these measures opportunistically to distort performance reporting and analysis. A relatively weak legal system and the absence of shareholder litigation in India make the abuse of these measures more likely than in developed countries. This study provides preliminary evidence based on annual reports for 187 firm-years for 54 firms about the use of non-GAAP measures in India. The evidence includes archival and anecdotal data. The evidence indicates that managers often use such measures opportunistically when faced with decline in sales or profit growth.

Publication Date

1-4-2021

Publisher

Indian Institute of Management Bangalore

Relation

IIMB Working Paper-637

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