Mark Soliman

Non-GAAP earnings provide managers the flexibility to exclude GAAP items to produce a more informative performance measure; however, the flexibility afforded to managers provides them the ability to opportunistically exclude recurring expenses from non-GAAP earnings. Prior literature focuses on the use of this form of disclosure at the firm level, although it is ultimately management’s decisions. We extend prior non-GAAP literature by providing evidence that CEO personality traits influence the use and quality of non-GAAP earnings. We focus our analysis on CEO narcissism. We find narcissistic CEOs are more likely to exclude expenses from non-GAAP earnings and that the magnitude of exclusions is greater. We find that non-GAAP exclusions are more persistent with narcissistic CEOs. Our results shed light on why firms disclose non-GAAP earnings and contributes to prior CEO narcissism research by highlighting how narcissistic CEOs are more likely to take advantage of the discretion in financial reporting disclosures.

Implied equity duration was originally developed to analyze the sensitivity of equity prices to discount rate changes. We demonstrate that implied equity duration is also useful for analyzing the sensitivity of equity prices to pandemic shutdowns. Pandemic shutdowns primarily impact short-term cash flows, thus they have a greater impact on low-duration equities. We show that
implied equity duration has a strong positive relation to U.S. equity returns and analyst forecast revisions during the onset of the 2020 COVID-19 shutdown. Our analysis also demonstrates that the underperformance of “value” stocks during this period is a rational response to their lower durations.

This paper investigates whether different levels of investor protection affect the market valuation of Non-Controlling Interests (NCI)’ share of subsidiaries in a consolidated entity. Using a set of European publicly listed firms, our findings suggest a positive (negative) association of NCI with parent companies’ share prices in countries with low (high) levels of investor protection. We interpret the findings as evidence that when non-controlling investors are not well protected, parent companies have an opportunity to extract rents from non-controlling owners, which leads to a positive valuation of NCI’s equity. However, in countries where non-controlling investors are well protected, parent companies are not able to extract rents but still must monitor and govern the related subsidiary so NCI becomes a net cost and the relation flips.