ACCTG 502 | Session 8 | Do Managers Issue More Voluntary Disclosure When GAAP Limits Their Reporting Discretion in Financial Statements?

ACCTG 502 | Session 8 | Do Managers Issue More Voluntary Disclosure When GAAP Limits Their Reporting Discretion in Financial Statements? - 2022 PAUL HRIBAR, RICHARD MERGENTHALER , AARON ROESCHLEY , SPENCER YOUNG ,  AND CHRIS X. ZHAO Introduction: The study examines whether managers make up for restrictions in Generally Accepted Accounting Principles (GAAP) by providing more voluntary disclosures. Through textual analysis of GAAP standards, the authors develop a new measure of how much each standard limits managerial discretion and look at various disclosure channels such as management forecasts, non-GAAP earnings, and Management Discussion and Analysis (MD&A) narratives. They find that when GAAP creates tighter limits, managers increase voluntary disclosures to fill information gaps for investors.