Mandatory XBRL Adoption, Product Market Competition, and Information Environment

53 Pages Posted: 26 Sep 2018 Last revised: 11 Sep 2021

See all articles by Sris Chatterjee

Sris Chatterjee

Fordham University - Gabelli School of Business

Sudip Gupta

Johns Hopkins University

Joon Ho Kong

Fordham University - Gabelli School of Business

Date Written: September 8, 2021

Abstract

This paper analyzes the impact of information processing cost on the quality of public information production by managers and analysts in the presence of product market competition. Using the staggered adoptions of XBRL (eXtensible Business Reporting Language) as a natural experiment, we identify and estimate the impact of XBRL’s lower information processing cost. The evidence shows that both managers and analysts are more consistent and accurate in forecasting earnings and that stock prices incorporate more firm-specific information, after XBRL implementations, especially in less competitive industries. These results are consistent with prior theoretical and empirical findings (Peress (2010), Kurlat and Veldkamp (2015), Gaspar and Massa (2006), Dong et al. (2016)).

Keywords: Corporate disclosures, Management forecasts, Analyst forecasts, Product market competition, XBRL, Stock return synchronicity

JEL Classification: D80, L1, M40, M41

Suggested Citation

Chatterjee, Sris and Gupta, Sudip and Kong, Joon Ho, Mandatory XBRL Adoption, Product Market Competition, and Information Environment (September 8, 2021). Available at SSRN: https://ssrn.com/abstract=3245627 or http://dx.doi.org/10.2139/ssrn.3245627

Sris Chatterjee

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

Sudip Gupta (Contact Author)

Johns Hopkins University ( email )

Baltimore, MD 20036-1984
United States

Joon Ho Kong

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

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