What Do the Markets Say? Shareholder Wealth Effects of the XBRL Mandate

We investigate the market reaction to legislative events pertaining to the eXtensible Business Reporting Language (XBRL) mandate. The SEC contends that requiring issuers to adopt XBRL for filing their financial statements would reduce information processing costs and improve market efficiency. In contrast, skeptics argue that the mandatory adoption of XBRL would impose substantial costs while providing few, if any, benefits to investors. Using stock returns from countries that did not mandate the adoption of XBRL to model normal U.S. returns, we provide evidence of a positive market reaction to legislative events related to the XBRL mandate. Moreover, we find that the abnormal returns to these events are increasing for firms with less accessible information, higher information asymmetry, greater information processing costs, and lower financial reporting transparency. Overall, our results suggest an expected net benefit to shareholders from the XBRL mandate.