The Impact of Information Processing Costs on Firm Disclosure Choice: Evidence from the XBRL Mandate

ABSTRACT This paper examines the effect of market participants’ information processing costs on firms’ disclosure choice. Using the recent eXtensible Business Reporting Language (XBRL) regulation, I find that firms increase their quantitative footnote disclosures upon implementation of XBRL detailed...

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Bibliographic Details
Published in:Journal of accounting research 2019-09, Vol.57 (4), p.919-967
Main Author: BLANKESPOOR, ELIZABETH
Format: Article
Language:English
Subjects:
Companies
D83
Disclosure
Extensible Business Reporting Language
Information processing
information processing costs
M41
M48
O33
XBRL
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Summary:ABSTRACT This paper examines the effect of market participants’ information processing costs on firms’ disclosure choice. Using the recent eXtensible Business Reporting Language (XBRL) regulation, I find that firms increase their quantitative footnote disclosures upon implementation of XBRL detailed tagging requirements designed to reduce information users’ processing costs. These results hold in a difference‐in‐difference design using matched nonadopting firms as controls, as well as two additional identification strategies. Examination of the disclosure increase by footnote type suggests that both regulatory and nonregulatory market participants play a role in monitoring firm disclosures. Overall, these findings suggest that the processing costs of market participants can be significant enough to impact firms’ disclosure decisions.
ISSN:0021-8456
1475-679X
DOI:10.1111/1475-679X.12268