PRO FORMA EARNINGS AND EXECUTIVE COMPENSATION IN HIGH- VERSUS LOW-TECH FIRMS

Abstract

We use a sample of actual pro forma earnings announcements to extend prior research by examining whether the informativeness of pro forma earnings is affected by the industry membership. We also examine the association between executive compensation and pro forma earnings. The results suggest that pro forma earnings are more value relevant in high-tech industries. In addition, we find that executive compensation is more sensitive to pro forma earnings relative to GAAP earnings, especially in low-tech industries. Finally, we find weak evidence that the association between pro forma earnings and executive compensation is stronger for low-tech firms relative to high-tech firms.