Over the past three decades, pro forma figures have become a central element of corporate reporting, particularly among capital market-oriented enterprises. These non-GAAP indicators are widely used in investor communication, company valuation (e.g., via EBITDA multiples), and are now disclosed by nearly all firms in the United States and Germany. They have become an integral part of investor relations, often presented more prominently than traditional GAAP measure. Especially in listed companies, the pressure to meet investor expectations has increased the appeal of flexible, adjustable pro forma measures.
Despite their popularity, pro forma figures remain controversial. On the one hand, they can enhance information quality by removing distorting one-off effects, thereby providing stakeholders with a clearer picture of operational performance. On the other hand, their discretionary definition and voluntary disclosure allow for selective adjustments and opaque presentation, creating risks of communication manipulation. This tension has been highlighted in both academic and regulatory debates. Early scandals, revealed the dangers of unregulated use and triggered regulatory responses in the US, which have since been partially adopted in Germany.
Academic research on non-GAAP reporting has expanded significantly in the US, while in Germany it remains limited. In particular, systematic empirical studies on the definition of pro forma measures and industry-specific practices are scarce. This thesis seeks to close this gap by examining the definition and quality of pro forma figures in the annual reports of German listed companies between 2019 and 2023. Using quantitative content analysis of DAX 40 reports, data is collected manually and evaluated according to predefined categories. The quality of reconciliation statements is assessed based on nomenclature, adjustments, transparency, and presentation.
The study thereby contributes empirically to German research on pro forma reporting by highlighting current practice and identifying implications for future research and regulation. Beyond empirical analysis, it draws on agency, stakeholder, contingency, and institutional theory to interpret the informative and opportunistic motives of voluntary non-GAAP reporting. Thus, the thesis combines empirical evidence with a theoretical framework, aiming to support practice-oriented considerations on the future development of pro forma reporting.
Table of Contents
- 1 Introduction
- 2 Theoretical background and literature review
- 2.1 Definition of pro forma metrics
- 2.2 Intention, purpose, and critique of pro forma metrics
- 2.3 Regulatory framework of pro forma reporting
- 2.3.1 Regulatory framework in the United States
- 2.3.2 Regulatory framework in Germany
- 2.4 Review of German literature on pro forma reporting
- 2.5 Research gap and research questions
- 3 Empirical analysis of pro forma metrics
- 3.1 Sample description and sample selection process
- 3.2 Research design
- 3.3 Empirical results
- 3.3.1 Frequency of non-GAAP reporting across time and industries
- 3.3.2 Quality of the definition of pro forma metrics across time and industries
- 3.3.2.1 Type and labeling of pro forma metrics
- 3.3.2.2 Adjustments of pro forma metrics
- 3.3.2.3 Transparency of pro forma metrics
- 3.3.2.4 Conclusion of the quality discussion
- 3.3.3 Quantitative difference between GAAP and pro forma earnings
- 3.4 Limitations and future research possibilities
- Frequency and prevalence of pro forma reporting in Germany across various industries.
- Qualitative aspects of pro forma reporting, including nomenclature, adjustments, and reconciliation transparency.
- The quantitative difference between Generally Accepted Accounting Principles (GAAP) and pro forma earnings, providing insights into managerial reporting motivations.
- Analysis of pro forma reporting through the lens of agency, stakeholder, contingency, and institutional theories.
- Comparison of German pro forma reporting practices with existing literature and regulatory frameworks, particularly in the US.
- 1 Introduction
- 2 Theoretical background and literature review
- 2.1 Definition of pro forma metrics
- 2.2 Intention, purpose, and critique of pro forma metrics
- 2.3 Regulatory framework of pro forma reporting
- 2.3.1 Regulatory framework in the United States
- 2.3.2 Regulatory framework in Germany
- 2.4 Review of German literature on pro forma reporting
- 2.5 Research gap and research questions
- 3 Empirical analysis of pro forma metrics
- 3.1 Sample description and sample selection process
- 3.2 Research design
- 3.3 Empirical results
- 3.3.1 Frequency of non-GAAP reporting across time and industries
- 3.3.2 Quality of the definition of pro forma metrics across time and industries
- 3.3.2.1 Type and labeling of pro forma metrics
- 3.3.2.2 Adjustments of pro forma metrics
- 3.3.2.3 Transparency of pro forma metrics
- 3.3.2.4 Conclusion of the quality discussion
- 3.3.3 Quantitative difference between GAAP and pro forma earnings
- 3.4 Limitations and future research possibilities
- Frequency and prevalence of pro forma reporting in Germany across various industries.
- Qualitative aspects of pro forma reporting, including nomenclature, adjustments, and reconciliation transparency.
- The quantitative difference between Generally Accepted Accounting Principles (GAAP) and pro forma earnings, providing insights into managerial reporting motivations.
- Analysis of pro forma reporting through the lens of agency, stakeholder, contingency, and institutional theories.
- Comparison of German pro forma reporting practices with existing literature and regulatory frameworks, particularly in the US.
Objectives and Key Themes
This master's thesis aims to analyze the definition and quality of pro forma key figures in the annual reports of German listed companies from 2019 to 2023, examining their frequency, quality, and underlying motivations across different industries. A quantitative content analysis of DAX 40 companies' reports is used to assess the quality of pro forma figure definitions based on nomenclature, adjustments made, and transparency of reconciliations.
Chapter Summaries
1 Introduction: This chapter introduces the increasing prevalence of pro forma figures in corporate reporting, particularly among capital market-oriented companies. It highlights the use of these non-GAAP indicators in external communication and company valuation, while acknowledging the existing controversies surrounding their flexibility and potential for manipulation. The chapter emphasizes the need for further empirical research, particularly in Germany, focusing on the systematic analysis of pro forma measures' definition over time and across industries. The thesis aims to fill this research gap by analyzing the definition and quality of pro forma figures in German listed companies' annual reports from 2019 to 2023.
2 Theoretical background and literature review: This chapter provides a comprehensive overview of the theoretical and empirical literature on pro forma reporting. It defines pro forma metrics, distinguishes between broad and narrow definitions, and discusses the informative and opportunistic motives behind their use. It analyzes these motives through the lens of agency, stakeholder, contingency, and institutional theories. The chapter also reviews the regulatory frameworks in the US and Germany, highlighting the evolution of regulations and their impact on pro forma reporting practices. Finally, it identifies a research gap in the systematic analysis of pro forma measures' definition over time and across industries in Germany, setting the stage for the empirical analysis in the following chapters.
3 Empirical analysis of pro forma metrics: This chapter details the methodology and results of an empirical analysis of pro forma reporting in German DAX 40 companies from 2019 to 2023. It describes the sample selection process, data collection methods, and the research design used to answer the research questions. The analysis focuses on the frequency of pro forma reporting, the quality of the definitions, and the quantitative differences between GAAP and pro forma earnings. The chapter uses regression analysis to examine the influence of industry affiliation on adjustment types and reconciliation quality, and explores the potential opportunistic and informative motives behind pro forma reporting.
Keywords
Pro forma reporting, non-GAAP earnings, earnings management, financial reporting, Germany, DAX 40, regulatory framework, reconciliation, transparency, agency theory, stakeholder theory, contingency theory, institutional theory, empirical analysis, qualitative analysis, quantitative analysis, industry differences, opportunistic motives, informative motives.
Table of Contents
Objectives and Key Themes
This master's thesis aims to analyze the definition and quality of pro forma key figures in the annual reports of German listed companies from 2019 to 2023, examining their frequency, quality, and underlying motivations across different industries. A quantitative content analysis of DAX 40 companies' reports is used to assess the quality of pro forma figure definitions based on nomenclature, adjustments made, and transparency of reconciliations.
Chapter Summaries
1 Introduction: This chapter introduces the increasing prevalence of pro forma figures in corporate reporting, particularly among capital market-oriented companies. It highlights the use of these non-GAAP indicators in external communication and company valuation, while acknowledging the existing controversies surrounding their flexibility and potential for manipulation. The chapter emphasizes the need for further empirical research, particularly in Germany, focusing on the systematic analysis of pro forma measures' definition over time and across industries. The thesis aims to fill this research gap by analyzing the definition and quality of pro forma figures in German listed companies' annual reports from 2019 to 2023.
2 Theoretical background and literature review: This chapter provides a comprehensive overview of the theoretical and empirical literature on pro forma reporting. It defines pro forma metrics, distinguishes between broad and narrow definitions, and discusses the informative and opportunistic motives behind their use. It analyzes these motives through the lens of agency, stakeholder, contingency, and institutional theories. The chapter also reviews the regulatory frameworks in the US and Germany, highlighting the evolution of regulations and their impact on pro forma reporting practices. Finally, it identifies a research gap in the systematic analysis of pro forma measures' definition over time and across industries in Germany, setting the stage for the empirical analysis in the following chapters.
3 Empirical analysis of pro forma metrics: This chapter details the methodology and results of an empirical analysis of pro forma reporting in German DAX 40 companies from 2019 to 2023. It describes the sample selection process, data collection methods, and the research design used to answer the research questions. The analysis focuses on the frequency of pro forma reporting, the quality of the definitions, and the quantitative differences between GAAP and pro forma earnings. The chapter uses regression analysis to examine the influence of industry affiliation on adjustment types and reconciliation quality, and explores the potential opportunistic and informative motives behind pro forma reporting.
Keywords
Pro forma reporting, non-GAAP earnings, earnings management, financial reporting, Germany, DAX 40, regulatory framework, reconciliation, transparency, agency theory, stakeholder theory, contingency theory, institutional theory, empirical analysis, qualitative analysis, quantitative analysis, industry differences, opportunistic motives, informative motives.
Frequently asked questions
What is the main goal of the master's thesis on pro forma metrics in German listed companies?
The master's thesis aims to analyze the definition and quality of pro forma key figures in the annual reports of German listed companies from 2019 to 2023. It focuses on examining their frequency, quality, and underlying motivations across different industries.
What is pro forma reporting?
Pro forma reporting involves using non-GAAP (Generally Accepted Accounting Principles) metrics to present a company's financial performance. These metrics often exclude certain expenses or include adjustments to offer a different view of profitability or earnings.
What theories are used to analyze pro forma reporting?
The analysis uses agency theory, stakeholder theory, contingency theory, and institutional theory to understand the motivations and implications of pro forma reporting.
Which regulatory frameworks are reviewed in the thesis?
The thesis reviews the regulatory frameworks for pro forma reporting in both the United States and Germany.
What research gap does the thesis address?
The thesis addresses the research gap in the systematic analysis of pro forma measures' definition over time and across industries in Germany.
What methodology is used in the empirical analysis?
The empirical analysis uses a quantitative content analysis of DAX 40 companies' annual reports from 2019 to 2023. Regression analysis is also used to examine the influence of industry affiliation on adjustment types and reconciliation quality.
What are the key areas of focus in the qualitative analysis of pro forma reporting?
The qualitative analysis focuses on the nomenclature, adjustments made, and transparency of reconciliations in pro forma figure definitions.
What is the significance of analyzing the quantitative difference between GAAP and pro forma earnings?
Analyzing the quantitative difference provides insights into the potential managerial reporting motivations behind the use of pro forma metrics.
What keywords are associated with this research?
The keywords include pro forma reporting, non-GAAP earnings, earnings management, financial reporting, Germany, DAX 40, regulatory framework, reconciliation, transparency, agency theory, stakeholder theory, contingency theory, institutional theory, empirical analysis, qualitative analysis, quantitative analysis, industry differences, opportunistic motives, and informative motives.
What are the main objectives of the thesis?
The objectives are to determine the frequency of non-GAAP reporting across time and industries, evaluate the quality of definitions, and measure the quantitative difference between GAAP and pro forma earnings.
- Quote paper
- Tobias Jähnke (Author), 2025, The definition of pro forma key figures over time, Munich, GRIN Verlag, https://www.grin.com/document/1619332
