Equity options trading and non-GAAP earnings disclosure

I investigate the influence of informed trading on the disclosure and quality of non-GAAP earnings measures in quarterly earnings releases. The results reveal that informed trading as proxied by the volume of equity options trading decreases the likelihood of non-GAAP earnings disclosure. This evidence suggests that private information gathering by informed investors supplants the need for managers to disclose adjusted measures of the firm’s core operating performance. However, when managers still choose to disclose non-GAAP earnings, I find that option trading volume is associated with higher quality non-GAAP disclosures. Specifically, I find that managers’ non-GAAP exclusions are less aggressive and are more informative to investors. My results are distinct from the effects induced by short selling and are robust to controls for endogeneity. Lastly, using a recently developed measure of risk information, I find evidence suggesting that non-GAAP exclusions are deemed risk-relevant by option traders. Thus, managers who opt to provide non-GAAP metrics are seemingly doing so to better inform investors about future firm risk.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Accountancy

Grantor

University of Illinois Urbana-Champaign

Year dc:date

2025

Author dc:creator

• Wang, Haoyan

Contributors dc:contributor

• Brown, Nerissa C.
• Chen, Ciao-Wei
• Zhu, Wei
• Irani, Rustom M.

• Informed trading
• Voluntary disclosures
• Options trading
• Non-GAAP disclosures

Statement dc:rights

• Copyright 2025 Haoyan Wang

Language dc:language

en, eng

Handle dc:identifier

https://hdl.handle.net/2142/129547

OAI record oai:identifier

https://www.ideals.illinois.edu/oai-pmh?verb=GetRecord&metadataPrefix=etdms&identifier=oai%3Awww.ideals.illinois.edu%3A2142%2F129547