Customers’ Non-GAAP Disclosures and Suppliers’ Investment Efficiency

• Customers’ non-GAAP disclosures improve suppliers’ investment efficiency. • Only high-quality non-GAAP disclosures provide useful information to suppliers. • Effects are stronger when supplier dependence or information frictions are high. • Disclosures reduce both supplier underinvestment and overinvestment. • Findings show real effects of non-GAAP reporting beyond capital markets. We examine whether customers’ non-GAAP earnings disclosures influence their suppliers’ investment efficiency. We find that suppliers exhibit greater investment efficiency when their major customers disclose non-GAAP earnings, particularly when the disclosures are of higher quality. The effect is stronger when suppliers are more dependent on their customers, operate in durable goods industries, or when customers face lower analyst coverage. Further analysis shows that customer non-GAAP disclosures are associated with a reduced likelihood of both supplier underinvestment and overinvestment. These findings highlight the informational value of customer non-GAAP disclosures for supplier investment decisions.