{"title":"Non-GAAP measure disclosure and insider trading incentives in high-tech IPO firms","authors":"Bishal Bc, Bo Liu","doi":"10.1108/arj-01-2021-0016","DOIUrl":null,"url":null,"abstract":"\nPurpose\nThis paper aims to investigate whether the non-generally accepted accounting principles (GAAP) performance measures (NGMs) disclosure by high-tech initial public offering (IPO) firms signal firms’ efforts to maintain relatively high stock price levels before the expiration of the lock-up period to benefit insider selling.\n\n\nDesign/methodology/approach\nThe authors perform ordinary least squares and logit regressions using financial statement data and hand collected data on NGM disclosures for high-tech firms during the IPO process.\n\n\nFindings\nThe authors find that the top executives of high-tech IPO firms with NGM disclosures are significantly more likely to sell and sell significantly more insider shares at the lock-up expiration than those of high-tech IPO firms without NGM disclosures. At the same time, while high-tech NGM firms have stock returns similar to their counterparts without NGMs for the period before the lock-up expiration, their stock returns are substantially lower after insider selling following the lock-up expiration.\n\n\nPractical implications\nBy documenting the negative association between NGM disclosures and post-lockup expiration stock performance, the study highlights managerial deliberate optimism about the firm’s prospects which may not materialize. Hence, investors should take the NGM disclosures with a grain of salt.\n\n\nOriginality/value\nThis paper fills a notable void in the non-GAAP reporting literature by documenting a statistically and economically significant positive association between managerial equity trading incentives and NGM disclosures by high-tech IPO firms.\n","PeriodicalId":45591,"journal":{"name":"Accounting Research Journal","volume":null,"pages":null},"PeriodicalIF":2.4000,"publicationDate":"2021-12-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounting Research Journal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/arj-01-2021-0016","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 1
Abstract
Purpose
This paper aims to investigate whether the non-generally accepted accounting principles (GAAP) performance measures (NGMs) disclosure by high-tech initial public offering (IPO) firms signal firms’ efforts to maintain relatively high stock price levels before the expiration of the lock-up period to benefit insider selling.
Design/methodology/approach
The authors perform ordinary least squares and logit regressions using financial statement data and hand collected data on NGM disclosures for high-tech firms during the IPO process.
Findings
The authors find that the top executives of high-tech IPO firms with NGM disclosures are significantly more likely to sell and sell significantly more insider shares at the lock-up expiration than those of high-tech IPO firms without NGM disclosures. At the same time, while high-tech NGM firms have stock returns similar to their counterparts without NGMs for the period before the lock-up expiration, their stock returns are substantially lower after insider selling following the lock-up expiration.
Practical implications
By documenting the negative association between NGM disclosures and post-lockup expiration stock performance, the study highlights managerial deliberate optimism about the firm’s prospects which may not materialize. Hence, investors should take the NGM disclosures with a grain of salt.
Originality/value
This paper fills a notable void in the non-GAAP reporting literature by documenting a statistically and economically significant positive association between managerial equity trading incentives and NGM disclosures by high-tech IPO firms.