Market Reaction to XBRL Filings

48 Pages Posted: 9 Jan 2015

See all articles by Alex Dontoh

Alex Dontoh

New York University (NYU) - Department of Accounting

Samir Trabelsi

Brock University - Accounting

Date Written: January 9, 2015

Abstract

In 2009, the SEC mandated XBRL filings in an effort to enhance interpretation and analysis of financial statements. Recently, however, there have been complaints by some Fortune 500 companies that XBRL filings have not proven useful and have advocated for the SEC to scale down its implementation. This study investigates whether XBRL filings provide useful information to capital markets. We test predictions from Bayesian-inspired theory suggesting that individuals underreact to information releases initially if they expect subsequent follow-up disclosures to improve on the quality of the initial release. We investigate this prediction by examining differences in how the market reacts to quarterly earnings announcements between firms that issued XBRL filings during the Voluntary Filing Program (VFP) period and a matched sample of firms that did not. Using a differences-in-differences research design, we find that the market reacted significantly less to earnings announcements of firms that issued XBRL filings compared to a matched sample that did not issue filings during the VFP period but not during the period preceding it. We also find that firms that issued XBRL filings exhibited significantly lower excess return volatility compared to non-filers.

Suggested Citation

Dontoh, Alex and Trabelsi, Samir, Market Reaction to XBRL Filings (January 9, 2015). 2015 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: https://ssrn.com/abstract=2547579 or http://dx.doi.org/10.2139/ssrn.2547579

Alex Dontoh (Contact Author)

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
Suite 10-180
New York, NY 10012-1118
United States
212-998-0064 (Phone)
212-995-4004 (Fax)

Samir Trabelsi

Brock University - Accounting ( email )

St. Catharines, Ontario L2S 3A1
Canada

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