Do XBRL filings enhance informational efficiency? Early evidence from post-earnings announcement drift

Jap Efendi, Jin Dong Park, L. Murphy Smith

Research output: Contribution to journalArticlepeer-review

47 Scopus citations

Abstract

In 2009, the Securities Exchange Commission (SEC) mandated public firms to file their financial statements using eXtensible Business Reporting Language (XBRL). The SEC's main motive behind this mandate is that XBRL filings would enhance the informational efficiency in the stock markets by making financial data easier to use and analyze for a broad range of investors. Using a sample from the first wave of mandated XBRL filers, we find a decline in post earnings announcement drift for the good news portfolio in the post-XBRL adoption period. Instead of a drift associated with underreaction, we find that markets overreact to negative earnings surprises for the bad news portfolio during our observation period, which coincides with the financial crisis. We detect limited evidence that XBRL adoption mitigates overreaction, which is another form of market inefficiency. We also find limited evidence that XBRL particularly benefits small investors.

Original languageEnglish (US)
Pages (from-to)1099-1105
Number of pages7
JournalJournal of Business Research
Volume67
Issue number6
DOIs
StatePublished - Jun 2014
Externally publishedYes

Keywords

  • Market efficiency
  • Post earnings announcement drift
  • Stock market
  • XBRL

ASJC Scopus subject areas

  • Marketing

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