Data Standardization and Quality Degradation of Human-readable Data

Data standardization is a widely recommended solution to improving data quality. Despite the potential benefits, we examine if it has any unintended, especially undesirable, side effects on data quality. The eXtensible Business Reporting Language (XBRL) is an XML-based open standard that aims to facilitate the preparation, exchange and comparison of financial reports. Leveraging the unique opportunity created by the exogenous mandatory XBRL adoption enforced by the U.S. SEC, we use a difference-in-differences (DID) research design to establish the causal relationship between XBRL adoption and quality of HTML-formatted financial reports, an important source for investors and analysts to obtain firms’ financial information. Surprisingly, we find the mandatory XBRL adoption has degraded the quality of the adopting firms’ HTML-formatted financial reports, as measured by a number of data quality metrics, including spelling errors and readability. The U.S. SEC and adopting firms need design appropriate policies to minimize the undesirable side effects

The impact of mandatory adoption of XBRL on firm’s stock liquidity: a cross-country study

International audiencePurpose The purpose of this paper is to examine the impact of the mandatory adoption of eXtensible Business Reporting Language (XBRL) on firm’s stock liquidity. Design/methodology/approach Using a random-effects model, this study examines the impact of the mandatory adoption of XBRL (ADOPXBRL) on firm’s stock liquidity of 980 companies pertaining to 13 countries for a period from 2000 to 2016. Findings This paper finds that the mandatory ADOPXBRL affects negatively and significatively Amihud’s (2002) illiquidity ratio. Therefore, mandatory XBRL adoption enhances the firm’s stock liquidity. In addition, this paper finds that the impact of the mandatory ADOPXBRL on firm’s stock liquidity is more pronounced in civil law countries than in common law countries. Originality/value This paper contributes to the literature on the advantage of XBRL especially for the civil law countries by examining the impact of the mandatory ADOPXBRL on firm’s stock liquidity

Twenty Years of XBRL: What We Know and Where We Are Going

Purpose This paper extends the knowledge of eXtensible Business Reporting Language (XBRL) to synthesize what twenty years of accounting and business literature on XBRL suggests about the effective improvement from its implementation in financial reporting. Design/methodology/approach A systematic literature review and bibliometric analysis of 142 articles resulted in the identification of five primary research streams: adoption issues; financial reporting; decision-making processes, market efficiency and corporate governance; audit and assurance issues; and non-financial reporting. Findings The results reveal a scarcity of studies devoted to explicating the consequences of XBRL implementation on financial reporting. Also, some papers’ results question the usefulness of the language on the decision-making process. The overall lack of literature concerning the impact of XBRL on financial statement preparers, especially with reference to SMEs, is evident. Moreover, the consequences on corporate governance choices and the relevant internal decision-making processes are rarely debated. Research limitations/implications The findings are useful for users of companies’ financial disclosure policies, particularly for regulators who manage XBRL implementation in countries where XBRL has not yet been adopted as well as for others working in specific areas of financial disclosure, such as non-financial reporting and public sector financial reporting. Originality/value This study differs from previous literature on XBRL as it focuses on a wider period of analysis and offers a unique methodology – combination of bibliometric and systematic review – as well as a business perspective for deepening XBRL

Preserving Human Agency in Automated Compliance

As technology transforms financial services, so too must it transform the regulation of financial markets and intermediaries. The imperative of real-time, prophylactic regulation increasingly compels reallocation of regulatory and compliance budgets to surveillance and enforcement technology. At the same time, in light of the well-known weaknesses of automated systems, securities firms (and their regulators) must temper investment in automation with efforts to augment the agency of compliance professionals. This symposium contribution considers how investment in the professional development of compliance personnel can better integrate automated tools within established compliance and supervisory structures and thereby advance regulatory and operational objectives

Preserving Human Agency in Automated Compliance

As technology transforms financial services, so too must it transform the regulation of financial markets and intermediaries. The imperative of real-time, prophylactic regulation increasingly compels reallocation of regulatory and compliance budgets to surveillance and enforcement technology. At the same time, in light of the well-known weaknesses of automated systems, securities firms (and their regulators) must temper investment in automation with efforts to augment the agency of compliance professionals. This symposium contribution considers how investment in the professional development of compliance personnel can better integrate automated tools within established compliance and supervisory structures and thereby advance regulatory and operational objectives

Financial reporting with XBRL and its impact on the accounting profession

Since 2010, XBRL (eXtensible Business Reporting Language) has been widely adopted throughout the world. In 2013, both the HMRC (Inland Revenue) and Companies House in the UK accepted XBRL in the iXBRL (inline XBRL) format. Investors have had to face various issues related to XBRL-reported financial information, such as accuracy and interpretability, as well as potential risks with respect to this new format of financial reporting. The purpose of this study is to explore the impact of XBRL on the quality of financial reports and the accounting profession. For this study, a quality index evaluation model was built to examine the quality of financial reports. Over a thousand XBRL and non-XBRL formatted financial reports from three typical XBRL-adopting regions were then evaluated. This study finds that some of the contextual and accessibility qualities of financial reports have been greatly improved after using the XBRL format. However, the issue of accuracy has become more visible in current XBRL filings, due to the smaller and less comprehensive quantity of data stored in such filing systems. Using quality index scoring system, the trained professionals participating in this study confirm that XBRL-formatted financial reports demonstrate a greatly improved searching efficiency. Moreover, these reports generally display a quality superior to non-XBRL formatted financial reports under the designed quality index. More importantly, the quality of XBRL-formatted financial reports uploaded in the same database has been improving year by year. XBRL has not directly affected the accounting profession, being that most companies have outsourced the preparation of XBRL reports. However, it should additionally be noted that the questionnaires and interviews conducted with accountants in XBRL-adopting companies also reveal that these professionals feel increasing pressure both to prepare and to utilise XBRL-formatted financial information internally

Intention to adopt standard business reporting in Australia: an application of the technology-organization-environment framework

The SBR project in Australia represents a technology innovation offered to businesses that has been led by government (i.e., the Australian Treasury with the co-operation of major business regulators, the ASIC, ASX, ATO, ABS and State government Revenue Offices), with the preceding support of IT consultants, software developers and accounting/auditing firms. The Australian Treasury’s SBR project has substantially drawn on the XBRL taxonomy project designed and implemented by the government in the Netherlands. XBRL, a variant of Extensible Mark up Language (XML), defines the financial data on the web with explicit semantics in a machine readable format. This study seeks to understand the prospect of SBR adoption and the underlying factors that could be the determinants of intention to adopt in Australia. In addressing these objectives, the study reports findings from both the evaluation of normative claims made in the professional and academic literature about the virtues of using XBRL, and quantitative analysis of data collected from a survey designed to model the determinants of the extent of intention of companies, as perceived by their Chief Financial Officer, to voluntarily adopt SBR. The conclusion from normative assessment (after a review of both scholarly literature and practitioner comments) on XBRL/SBR is that both users (mainly investors/securities analysts) and regulatory bodies have most to gain out of the SBR implementation. It is expected that compliance reporting costs of the preparers would be reduced in the long run but there will be short-term costs associated with installing the SBR platform, with potential disruption to information processing and reporting systems, and with management and operating staff training. In the longer-term, preparers are likely to face pressure to meet users’ expectation for continuous, real-time, financial reporting that the SBR facility would have the capability to fulfil. This longer-term prospect for continuous, audited financial information that can be reported in flexible ways has the potential to reveal corporate proprietary information that competitors can use for competitive advantage against the reporting entity. The empirical part of this study, based on data from a survey of listed companies, finds that there is a low degree of intention to adopt SBR. This finding suggests that the voluntary take-up by listed companies of the Australian government’s SBR initiative will not succeed, as was the similar experience in the UK and the US. The study, therefore, concludes that, unlike most other innovations in information technology, technological arguments favouring SBR (or XBRL) as a reporting medium are not expected to induce adoption of SBR by listed companies in Australia; rather entities are most likely to respond to industry wide initiatives and communication about SBR before making a decision to adopt SBR. The study goes on to provide implications for practice in the light of this finding. The results of this study in the Australian SBR setting are also likely to be of interest to regulatory bodies in other countries that have had disappointing XBRL adoption rates. The study contributes to the gap (i.e. investigation of factors leading to XBRL adoption) of growing research on XBRL which tended to concentrate mainly on technological arguments. This study provides an analysis of survey data on intention to adopt SBR that is more generalizable. However the finding of this study is subject to limitations that are noted in the thesis

Flexible Integration and Efficient Analysis of Multidimensional Datasets from the Web

If numeric data from the Web are brought together, natural scientists can compare climate measurements with estimations, financial analysts can evaluate companies based on balance sheets and daily stock market values, and citizens can explore the GDP per capita from several data sources. However, heterogeneities and size of data remain a problem. This work presents methods to query a uniform view - the Global Cube - of available datasets from the Web and builds on Linked Data query approaches

Silence in Market Reaction to Annual Reports

Research problem - The literature suggests that the market either does not react or reacts with a delay to the content of annual reports, concerning notion given their importance for investment decisions due to the value relevance of the information they convey. According to the Efficient Market Hypothesis, the market should exhibit a prompt reaction to their release. Rationale - This study aims to uncover the underlying reasons for investors' lack of response to annual report filings. It predicts that the reaction depends, among other factors, on the release of preliminary disclosures of financial results, the method of distribution of annual reports and the length of an annual disclosure. The study examines the market reaction to FTSE100 companies' annual reports from 2006 to 2016. It also considers investor response to preliminary statements of annual. Specifically, it investigates whether investors react more promptly to preliminary disclosures compared to the more detailed annual reports, and how the absence of such preliminary reports might shift attention and reaction time to the information content of annual reports. Furthermore, the study examines changes in the market reaction associated with the shift from a paper-based submission system to the electronic National Storage Mechanism (NSM). This comparison aims to assess whether technological advancements in the dissemination method of corporate disclosure have improved market efficiency and accelerated investors’ response time. Lastly, the study investigates the effect of report length on the market, specifically looking at whether the market reacts differently to lengthier reports compared to those that are more concise. Research methods - To test the efficiency of market reactions, the researcher employs a short-run event study methodology to assess the impact of filings of annual reports on companies’ returns. The study determines whether the filing events captured abnormal returns compared to what would be expected if no filings occurred. If such abnormal returns are observed, it is concluded that the event impacted the companies' returns and that the market reacted efficiently to these filings. The event study, applied to all five enquiries, is followed by further tests on the impact of lengthy reporting on the market reaction using regression analysis. This additional analysis allows for the validation of findings by accounting for time, industry trends, and companies' specific characteristics. The model is tested for potential statistical issues, including non-stationarity, heteroscedasticity, multicollinearity and endogeneity, to ensure the reliability and consistency of the coefficient estimates. Main results - The study's results are mixed. It reveals no immediate abnormal reaction to the information content of annual reports. In contrast, the market shows a strong response to preliminary statements of annual reports. Additionally, contrary to the prediction, there is no evidence of the market responding to the content of annual reports in the absence of preliminary statements. Regarding dissemination methods, an abnormal price change is noted, but only in the first year following the National Storage Mechanism (NSM) adoption. Lastly, the study finds evidence supporting the impact of reporting length; investors tend to discount lengthy annual reports while reacting positively to more succinct ones. Conclusion - The study’s findings challenge the Efficient Market Hypothesis by showing a lack of market reactions to the information content of annual reports. This suggests that policies should emphasise the importance of report readability and simplicity to prompt quicker and more efficient investor responses. Specifically, the market tends to react negatively to lengthy reports, while succinct reports cause a positive response, indicating a policy need for guiding companies towards more concise reporting, including setting standards for report length. In the final section, the study points out the potential of artificial intelligence AI and machine learning in improving market efficiency by condensing reports, processing complex information effectively and analysing underlying sentiments and patterns in financial reporting, which can be important for detecting anomalies or obfuscation. This can aid in developing more informed and timely trading strategies, especially when the market underreacts or reacts with a delay to new information. Overall, the study advocates for policy changes that promote report clarity, technological advancement for better access to corporate disclosures and the use of AI to enhance market efficiency and investor protection