Does the XBRL Disclosure Management Solution Influence Earnings Release Efficiency and Earnings Management?

International Journal of Accounting and Information Management, Forthcoming

2016 Canadian Academic Accounting Association (CAAA) Annual Conference

40 Pages Posted: 11 Jan 2016 Last revised: 6 Feb 2018

See all articles by Mohammad J. Abdolmohammadi

Mohammad J. Abdolmohammadi

Bentley University - Department of Accountancy

Tien‐Shih Hsieh

University of Massachusetts Dartmouth - Department of Accounting & Finance

Zhihong Wang

Clark University

Date Written: February 5, 2018

Abstract

Implementation of eXtentible Business Reporting Language (XBRL) into corporate financial reporting processes has the potential to improve reporting efficiency and earnings quality (cf., Gunn 2007; Pinsker et al. 2005; Roohani et al. 2009). However, whether XBRL enables more or less misstatement and efficient reporting might be contingent on the strategy adopted by companies to implement XBRL (Garbellotto 2009). This study investigates whether adopting Disclosure Management Solution (DMS) strategy for XBRL implementation improves public companies earnings release efficiency and mitigates earnings management activities. Using a unique proprietary survey database along with financial data from COMPUSTAT, we hypothesize and find that use of DMS for XBRL implementation is negatively associated with earnings release time lag, especially for companies that release good news, indicating improved earnings release efficiency. We also hypothesize and find that use of DMS for XBRL implementation is inversely related to accruals-based earnings management as measured by positive and absolute values of discretionary accruals, but positively related to real activities-based earnings management as measured by acceleration of the timing of sales, and reduction of discretionary expenses. These results should be of interest to regulators, investors, management, and other stakeholders to better comprehend the consequences of XBRL implementation on corporate financial reporting.

Keywords: XBRL, Disclosure Management Solution, XBRL implementation, Earnings release time lag, accruals-based earnings management, real activities-based earnings management

JEL Classification: M41

Suggested Citation

Abdolmohammadi, Mohammad J. and Hsieh, Tien-Shih and Wang, Zhihong, Does the XBRL Disclosure Management Solution Influence Earnings Release Efficiency and Earnings Management? (February 5, 2018). 2016 Canadian Academic Accounting Association (CAAA) Annual Conference; 2016 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: https://ssrn.com/abstract=2713182

Mohammad J. Abdolmohammadi (Contact Author)

Bentley University - Department of Accountancy ( email )

175 Forest Street
279 Adamian Academic Center
Waltham, MA 02452
United States
781-891-2976 (Phone)

Tien-Shih Hsieh

University of Massachusetts Dartmouth - Department of Accounting & Finance ( email )

285 Old Westport Road
N Dartmouth, MA 02747-2300
United States

Zhihong Wang

Clark University ( email )

950 Main Street
Worcester, MA 01610
United States

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