Analyst coverage in IPO market and use of non-GAAP earnings in the prospectus

The disclosure of non-GAAP earnings measures is a common form of voluntary corporate disclosure among firms involved in an initial public offering (IPO) process. Using a sample of 21,004 analyst EPS forecasts calculated for 691 US IPOs completed between 2003 and 2012, it is examined how financial analysts perceive non-GAAP earnings information provided by managers in the prospectus filed with the SEC. In particular, it is investigated whether IPO firms that disclose also non-GAAP earnings in the prospectus receive analyst coverage earlier compared to IPO firms that disclose only GAAP earnings.