Customers’ non-GAAP disclosures and suppliers’ investment efficiency

Abstract

We examine whether customers’ non-GAAP earnings disclosures influence their suppliers’ investment efficiency. We find that suppliers exhibit greater investment efficiency when their major customers disclose non-GAAP earnings, particularly when the disclosures are of higher quality. The effect is stronger when suppliers are more dependent on their customers, operate in durable goods industries, or when customers face lower analyst coverage. Further analysis shows that customer non-GAAP disclosures are associated with a reduced likelihood of both supplier underinvestment and overinvestment. These findings highlight the informational value of customer non-GAAP disclosures for supplier investment decisions. Show more