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

Posted: 6 Oct 2019

See all articles by Elizabeth Blankespoor

Elizabeth Blankespoor

University of Washington - Michael G. Foster School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2019

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.

Keywords: information processing costs; disclosure; XBRL

JEL Classification: D83; M41; M48; O33

Suggested Citation

Blankespoor, Elizabeth, The Impact of Information Processing Costs on Firm Disclosure Choice: Evidence from the XBRL Mandate (September 1, 2019). Journal of Accounting Research, Vol. 57, No. 4, 2019, Available at SSRN: https://ssrn.com/abstract=3463897

Elizabeth Blankespoor (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

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