The relevance of XBRL extensions for stock markets: evidence from cross-listed firms in the US. Issue 5 (22nd March 2022)

• Record Type: Journal Article
• Authors: Cormier, Denis; Teller, Pierre; Dufour, Dominique
• Is Part Of: Managerial finance. Volume 48:Issue 5(2022)
• Page Start: 689
• Page End: 705
• Publication Date: 2022-03-22
• Subjects: Information asymmetry -- Value relevance -- XBRL extensions; Corporations -- Finance -- Periodicals; Business enterprises -- Finance -- Periodicals; 658.1505
• DOI: 10.1108/MF-07-2021-0340
• Languages: English
• ISSNs: 0307-4358

Abstract

Abstract : Purpose: The study investigates the relevance for stock markets of voluntary disclosure of eXtensible Business Reporting Language (XBRL) extensions [based on International Financial Reporting Standards (IFRS) or US-GAAP] for an international sample of US cross-listed firms. Design/methodology/approach: The study examines if the disclosure of XBRL extensions by a firm provides relevant information to market participants. Towards that end, this paper investigates whether this type of disclosure affects the level of information asymmetry between insiders and investors and if it is value relevant. This study measures information asymmetry by bid-ask spread and value relevance by stock price or Tobin's Q . Findings: After a certain level of disclosure of XBRL extensions, the impact on stock pricing is negative (creates noise on stock markets). Controlling for that phenomenon, both IFRS and US-GAAP XBRL extensions are value relevant. Second, results indicate that XBRL extensions are positively (negatively) related to stock market value for firms that exhibit positive (negative) earnings. This suggests a complementary effect between earnings and XBRL extensions on their relation with stock price or Tobin's Q . Finally, the results also indicate that both IFRS extensions and US-GAAP extensions are associated with lower information asymmetry (i.e. bid-ask spread). Originality/value: To the best of the authors' knowledge, this study is the first to investigate the relevance of XBRL extensions under IFRS for US cross-listed firms since the availability of the IFRS taxonomy for foreign private issuers that prepare financial statements under IFRS standards.