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Do XBRL Filings Take Longer

Do XBRL Filings Take Longer. Hui Du Kean Wu University of Houston – Clear Lake. “ interactive data has the potential to increase the speed, accuracy and usability of financial disclosure, and eventually reduce costs” (SEC, 2009). Timeliness of filing financial report.

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Do XBRL Filings Take Longer

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  1. Do XBRL Filings Take Longer Hui Du Kean Wu University of Houston – Clear Lake

  2. “interactive data has the potential to increase the speed, accuracy and usability of financial disclosure, and eventually reduce costs” (SEC, 2009)

  3. Timeliness of filing financial report • Investor response to SEC filings, and the response is stronger around a 10-K date than a 10-Q date (Griffin, 2003) • 10-Q allows investor to better assess the integrity of reported earnings (Balsam, Bartov, and Marguardt; 2002) • Financial statement user utilize footnote information to make adjustments at the 10-K dates (Franco, Wong and Zhou, 2011)

  4. Main Findings Preview • The time lags between fiscal year end and SEC filing date decrease for 76 days to 60 days for 10-K filings, and from 40 day to 36 days for 10-Q filing. • These decreases in reporting lag only manifest for on-time filer, not for extension filer. • In a 4 year window, reporting lags decrease from 69 days to 47 days for 10-K filings, from 38 days to 33 days for 10-Q filings.

  5. Hypothesis Development • Li, Lin, and Ni (2012) find XBRL adoption results in a significant reduction in cost of equity capital. • Information system are able to process large and complex routings and tasks effectively and efficiently (Polites and Karahanna, 2013). • Company using XBRL was moving 30% of its bookkeeping staff to different positions, and was able to decrease the reporting time (Pinsker and Li, 2008).

  6. “Bunching” - a Disclosure Timing Theory • Dye (2010) “the SEC’s recent initiatives regarding XBRL-tagging of financial data have been motivated in part to enhance the timeliness of financial reporting information.” • Prediction: Information acquisition and disclosure at a single point in time.

  7. Bunching under XBRL Jan 1 Post-XBRL Mar 1

  8. H1: Financial statement filings using XBRL takes shorter time than financial statement filings without using XBRL.

  9. Distribution of Reporting Lags(10-Q) Pre-XBRL Post-XBRL

  10. 10-Ks Pre-XBRL Post-XBRL

  11. Regression Model Reporting Lag = 0 +1XBRL+2lnS +3INV +4GS5 +5lnA +6ROA +7Loss +8LEV +9AR +10IA +11GOOD + 

  12. In disclosure “bunching” theory, one of the necessary conditions is that the presence of effective real-time reporting requirement. H2: The timely XBRL financial reporting is only among companies that make their filings in time, but not among companies that file extensions.

  13. Concluding Remarks • XBRL reduces reporting lag for both 10-Q and 10-K filings. • We also document a decreasingtrend of reporting lag after adoption of XBRL, suggesting a significant learning curve in the filing process. • The improvement is more pronounced for on-time filers, but not for filers that requested filing extensions. • Accounting information system improve reporting efficiency. • This paper may also draw policy implication that XBRL mandate improves business information processing and reporting efficiency.

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