T HE model presented in this paper is a system of recursive linear regression equations, the parameters of which are esti-mated from monthly series of data covering the

We present an economic model of systemic risk in which undercapitalization of the financial sector as a whole is assumed to harm the real economy, leading to a systemic risk externality. Each financial institution's contribution to systemic risk can be measured as its systemic expected shortfall (SES), that is, its propensity to be undercapitalized when the system as a whole is undercapitalized. SES increases in the institution's leverage and its marginal expected shortfall (MES), that is, its losses in the tail of the system's loss distribution. We demonstrate empirically the ability of components of SES to predict emerging systemic risk during the financial crisis of 2007-2009.

ABSTRACT We provide the first evidence after Regulation G on firms’ non-GAAP EPS denominator choices and whether they are informative or opportunistic. From 2013 to 2019, 17 percent of annual non-GAAP EPS numbers use denominators different from that of GAAP diluted EPS, which makes denominator adjustments among the most prevalent individual types of non-GAAP adjustments. For firms reporting GAAP and non-GAAP profits or GAAP losses and non-GAAP profits, we provide evidence consistent with denominator adjustments increasing non-GAAP EPS informativeness. Our evidence also suggests that opportunism in denominator choices is concentrated in firms reporting GAAP losses and non-GAAP profits and failing to adjust the denominator. Such nonadjustment is inconsistent with SEC requirements to report non-GAAP EPS “on a diluted basis” because the EPS denominator for a GAAP loss excludes dilutive claims. Although the SEC largely overlooks such firms, they are more likely, on average, to report non-GAAP EPS that analysts consider inflated. JEL Classifications: M40; M41; M48.