Title: The impact of financial performance on the value relevance of GAAP and non-GAAP profitability measures: evidence from the Amman Stock Exchange

Authors: Tareq Z. Mashoka

Addresses: Accounting Department, Mutah University, Mu'tah, Jordan

Abstract: This paper aims to examine the impact of a firm's financial performance on the value relevance of both GAAP and non-GAAP profitability measures in determining its value. The study posits that the value relevance of these measures is influenced by the financial performance of the company. The paper examines the value relevance of the profitability metrics by regressing the market value of equity on the profitability measures for listed firms on the Amman Stock Exchange (ASE) in Jordan from 2001 to 2019. The results show that for firms with consistent financial performance, GAAP profitability measures are more value relevant for investors. However, when firms experience a decline in sales and/or earnings, the results indicate that non-GAAP profitability measures are more value relevant. This paper presents evidence highlighting the significant impact of a company's financial performance on the value relevance of GAAP and non-GAAP profitability measures in evaluating the firm's value.

Keywords: non-GAAP measures; value relevance; financial performance.

DOI: 10.1504/IJMFA.2025.142954

International Journal of Managerial and Financial Accounting, 2025 Vol.17 No.1, pp.103 - 120

Received: 26 Feb 2023
Accepted: 05 Oct 2023
Published online: 02 Dec 2024 *

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