What Do the Markets Say? Shareholder Wealth Effects of the XBRL Mandate

Posted: 29 Aug 2017

See all articles by Gary Chen

Gary Chen

University of Illinois at Chicago

Sara (Xiaohong) Wang

University of Florida - Department of Finance, Insurance and Real Estate

Jie Zhou

National University of Singapore (NUS); National University of Singapore (NUS)

Date Written: August 26, 2017

Abstract

We investigate the market reaction to legislative events pertaining to the eXtensible Business Reporting Language (XBRL) mandate. The SEC contends that requiring issuers to adopt XBRL for filing their financial statements would reduce information processing costs and improve market efficiency. In contrast, skeptics argue that the mandatory adoption of XBRL would impose substantial costs while providing few, if any, benefits to investors. Using stock returns from countries that did not mandate the adoption of XBRL to model normal U.S. returns, we provide evidence of a positive market reaction to legislative events related to the XBRL mandate. Moreover, we find that the abnormal returns to these events are increasing for firms with less accessible information, higher information asymmetry, greater information processing costs, and lower financial reporting transparency. Overall, our results suggest an expected net benefit to shareholders from the XBRL mandate.

Keywords: eXtensible Business Reporting Language (XBRL), economic impact, market reaction, event study

JEL Classification: M41, K22

Suggested Citation

Chen, Gary and Wang, Sara (Xiaohong) and Zhou, Jie, What Do the Markets Say? Shareholder Wealth Effects of the XBRL Mandate (August 26, 2017). Journal of Information Systems, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3027015

Gary Chen

University of Illinois at Chicago ( email )

601 South Morgan Street
Chicago, IL 60607
United States

Sara (Xiaohong) Wang

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
352-392-8913 (Phone)

Jie Zhou (Contact Author)

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

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