GAAP Restrictions and Voluntary Disclosure

We examine whether managers provide additional voluntary disclosures when accounting standards are more restrictive. We estimate restrictiveness by counting the number of times restrictive modal verbs are mentioned in the text of each standard. Our primary findings indicate managers issue more earnings forecasts and are more likely to disclose non-GAAP earnings when GAAP standards are more restrictive. We find the relation between standard restrictiveness and voluntary disclosure is stronger when investors demand more information and when there is better external oversight, and weaker when firms have conflicting reporting objectives. We also conduct a difference-in-difference analysis examining the use of non-GAAP around standard changes that both increase and decrease restrictiveness. We find managers are more likely to exclude (include) expenses related to the standard change when the new standard is more (less) restrictive. Collectively, our results suggest managers use other channels to convey important information when accounting standards restrict their ability to do so in GAAP financial statements.