Does XBRL Adoption Constrain Managerial Opportunism in Financial Reporting? Evidence from Mandated U.S. Filers

47 Pages Posted: 15 Jan 2013

See all articles by Jeong-Bon Kim

Jeong-Bon Kim

City University of Hong Kong

Joung W. Kim

Nova Southeastern University

Jee-Hae Lim

University of Hawaii, Manoa

Date Written: January 9, 2013

Abstract

In this study, we examine whether XBRL disclosure (i.e., interactive data submissions) reduces the magnitude of accounting accruals for firms during SEC mandated years. Using mandated XBRL filers, we first compare the magnitude of absolute discretionary accruals in the XBRL-adoption quarters with that in the non-XBRL-adoption quarters. This comparison shows that absolute discretionary accruals decreases significantly from the pre-XBRL-adoption period to the post-XBRL-adoption adoption period. This finding is in line with the view that the XBRL adoption constrains managerial opportunism in financial reporting in general and opportunistic accrual management in particular. Our analyses further reveal that the use of standardized official XBRL elements significantly reduces levels of discretionary accruals in the post-adoption period, while the use of customized extension elements does not. This result is consistent with the view that the former discourages opportunistic accruals management more effectively than the latter by improving transparency and comparability in financial reporting.

Keywords: XBRL (eXtensible Business Reporting Language), interactive data, official elements, extensions, earnings management, discretionary accruals

Suggested Citation

Kim, Jeong-Bon and Kim, Joung W. and Lim, Jee-Hae, Does XBRL Adoption Constrain Managerial Opportunism in Financial Reporting? Evidence from Mandated U.S. Filers (January 9, 2013). CAAA Annual Conference 2013. Available at SSRN: https://ssrn.com/abstract=2201009 or http://dx.doi.org/10.2139/ssrn.2201009

Jeong-Bon Kim

City University of Hong Kong ( email )

Department of Accountancy
83 Tat Chee Avenue
Kowloon Tong
Hong Kong
852-3442-7909 (Phone)

Joung W. Kim

Nova Southeastern University ( email )

3301 College Avenue
Ft. Lauderdale, FL 33314
954-262-5110 (Phone)
954-262-3974 (Fax)

Jee-Hae Lim (Contact Author)

University of Hawaii, Manoa ( email )

2404 Maile Way
Honolulu, HI Honolulu 96822
United States
(808) 956-8503 (Phone)
(808) 956-9888 (Fax)

HOME PAGE: http://shidler.hawaii.edu/directory/jee-hae-lim/soa

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