HCBE Faculty Articles

Title

The Effect of Mandatory XBRL Reporting across the Financial Information Environment: Evidence in the First Wave of Mandated U.S. Filers

Document Type

Article

Date

Spring 2012

Publication Title

Journal of Information Systems

ISSN or ISBN

0888-7985

Volume

26

Issue

1

First Page

127

Last Page

153

Description

This study examines the effect of mandatory XBRL disclosure across various aspects of the financial information environment. Our findings show an increase in information efficiency, a decrease in event return volatility, and a reduction of change in stock returns volatility for 428 firms (1,536 10-K and 10-Q filings) post-XBRL disclosure. In addition, this study shows that XBRL mitigates information risk in the market, especially when there is increased uncertainty in the information environment. Our results are robust to various alternative specifications and research modifications such as a matched-pair control (326 XBRL versus 326 non-XBRL firms), current stock market condition, potential earnings releases, and corporate governance. This study contributes to the literature by systematically documenting evidence of how mandatory XBRL disclosure decreases information risk and information asymmetry in both general and uncertain information environments. Our evidence could potentially assist the SEC in their effort to expeditiously assess the benefits of XBRL.

DOI

10.2308/isys-10260

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