To read this content please select one of the options below:

Religion and disclosure of non-GAAP earnings

Wei Jiang (School of Accountancy, California State University, Fullerton, California, USA)
Pureum Kim (School of Accountancy, California State University, Fullerton, California, USA)
Myungsoo Son (School of Accountancy, California State University, Fullerton, California, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 11 October 2022

Issue publication date: 3 January 2023




The purpose of this study is to examine whether non-generally accepted accounting principles (GAAP) earnings disclosed by firms headquartered in high religious areas (religious firms) are more informative. The non-GAAP disclosure is voluntary and not subject to external audits, and it is difficult to verify the accuracy ex post, which provides management with incentives to strategically use non-GAAP reporting. This study examines religiosity as a potential governance mechanism that reduces management opportunism.


Using a comprehensive sample from 2010 to 2018, the authors conduct univariate analyses and regression tests. Religiosity is measured by the number of religious adherents in the Metropolitan Statistical Areas of a firm’s headquarter location.


This study finds that religious firms disclose non-GAAP earnings more frequently compared to non-religious firms. This study further documents that religiosity is negatively associated with aggressive non-GAAP reporting. It also finds that items excluded by religious firms in calculating non-GAAP earnings are less associated with future performance, suggesting that these excluded items are transient and, thus, of higher quality. Finally, the market returns on unexpected non-GAAP earnings (i.e. earnings response coefficients) are greater for religious firms. Overall, the results of this study show that non-GAAP reporting by religious firms is more likely to be informative rather than opportunistic.

Research limitations/implications

Despite the authors’ best endeavors, this study does not fully address the issue of endogeneity, and therefore, the results of this study must be interpreted as strong association rather than causation.

Practical implications

Religious social norms (regional level) can complement a firm’s corporate governance and ethical codes (firm level) by attenuating undesirable, opportunistic management practices. These findings should be informative to investors who assess the quality non-GAAP disclosures. The findings of this study are also relevant to regulators [e.g. the Securities and Exchange Commission (SEC)] when they allocate limited resources. The SEC may use less resources for monitoring firms headquartered in religious areas and apply the saved resources on monitoring riskier firms.


To the best of the authors’ knowledge, this is the first study to show that religiosity may act as a potential monitoring mechanism that attenuates aggressive non-GAAP earnings and enhances the informativeness of non-GAAP. The findings of this study suggest that religious social norms (regional level) can complement a firm’s corporate governance and ethical codes (firm level) by restricting undesirable, opportunistic management practices.



The authors appreciate valuable comments provided by two anonymous reviewers, the associate editor, Haina Shi, and the editor, Jie Zhou.


Jiang, W., Kim, P. and Son, M. (2023), "Religion and disclosure of non-GAAP earnings", Managerial Auditing Journal, Vol. 38 No. 1, pp. 58-84.



Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

Related articles