Monika Causholli presented her co-authored paper titled "Board Connectedness and non-GAAP Earnings" at Ohio State University this month. The paper is co-authored with Nicole Thorne Jenkins (University of Virginia - McIntire School of Commerce), and Valbona Sulcaj (University of Texas at El Paso - Department of Accounting & Information Systems; University of Kentucky, Von Allmen School of Accountancy).

Abstract: We examine whether the quality of non-GAAP earnings disclosures varies with the board of directors’ connectedness. We construct a two-layer multiplex network where nodes represent boards while ties represent shared directorships in the first layer and industry membership in the second layer. The overlap between the layers creates a network where central boards have greater access to more relevant information and best practices relative to peripheral boards. We use this multiplex centrality to capture board connectedness. Relying on two governance theories, namely, resource dependence theory and agency theory, we predict that better connected boards in the network are better able to not only mitigate managerial opportunism but also to advise and counsel management in developing and disclosing higher quality non-GAAP earnings. Consistent with our predictions, we find that firms with highly central boards have less persistent non-GAAP exclusions, are less likely to receive a non-GAAP comment from the SEC, and are less likely to use non-GAAP exclusions to meet or beat earnings benchmarks. Our study extends prior literature on the role of corporate governance on non-GAAP earnings quality.