Do Managers Issue More Voluntary Disclosure When GAAP Limits Their Reporting Discretion in Financial Statements?

Paul Hribar, Richard Mergenthaler, Aaron Roeschley, Spencer Young, Chris X. Zhao

Research output: Contribution to journalArticlepeer-review


We examine whether managers provide more voluntary disclosure when GAAP limits their reporting discretion in financial statements. We find managers are more likely to disclose non-GAAP earnings, issue more management forecasts, and provide longer yet more readable management discussion and analysis (MD&A) disclosures when GAAP limits their discretion. These effects are stronger when there is greater demand for information and better monitoring. In contrast, these effects are weaker when managers have incentives to manage earnings. Difference-in-differences analyses around standard changes provide further evidence that managers make more non-GAAP adjustments and are more likely to discuss the standard and its underlying transaction in the MD&A when a new standard limits their discretion more than its predecessor. Collectively, our results suggest managers use voluntary disclosure channels to convey information when GAAP limits their ability to recognize such information in financial statements.

Original languageEnglish (US)
JournalJournal of Accounting Research
StateAccepted/In press - 2021

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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