INTRODUCTIONThe use of classification shift by managers in reporting income, profits, losses and expenses on the income statement has attracted much attention from the financial media, regulators and academic researchers in recent years. Shifting the classification as a practice involves manipulating the income statement by reporting profits and losses, expenses and revenues in other areas of the income statement other than where they should have appropriately appeared according to “Generally Accepted Accounting Practice”. The objective of this paper is to determine whether the market overvalues ​​core earnings as a result of classification shifting and to provide evidence of the negative consequences for shareholders when managers employ the use of classification shifting to increase core earnings. Previous studies investigate various aspects of non-GAAP reporting, such as the masking of true economic performance where, McVay (2006) hypothesizes that managers are incentivized to report core expenses which, including cost of goods sold, overhead and administrative, as a special item decreasing income in an attempt to inflate basic profitability. The strong preference toward “street earnings” over GAAP earnings also contributes to managers' use of classification switching (Bradshaw and Sloan 2002). Further studies have highlighted the opportunistic use of non-GAAP reporting to influence analyst forecasts and investor decision-making (Bhattacharya et al. 2007; Black et all. 2010: Doyle et al. 2013). I hope to broaden knowledge by providing evidence regarding mispriced core earnings and their misleading negative impact on shareholders. The case of Enron, an American energy company, comes to mind, which managed to... mid-paper... core expenses and losses the following year (t + 1). The resulting effect of this will lead to lower persistence in core earnings, as entities that change classification are unlikely to persistently continue to shift expenses and losses away from core expenses. Doyle et al. (2003) find that higher expenses shifted from pro forma earnings can predict lower future cash flow; however, the market fails to fully appreciate the implications of lower future cash flow on the firm's future value. A hedge portfolio test based on the classification of exclusions and a regression test that controls for risks and other anomalies reveals that high excluded expenses are associated with significantly negative abnormal returns for up to three years. These results suggest that core earnings reported by companies may mislead the market.H1. CORE PROFIT OF MISPRICE SH2 COMPANIES. WRONG CORE PROFITS DECEIVE INVESTORS