(i)XBRL Adoption and Earnings Management among Private Firms
Abstract
I examine whether the use of inline eXtensible Business Reporting Language ((i)XBRL) for financial reporting (i.e., digital financial reports) constrains earnings management for private firms. Using a sample of voluntary (i)XBRL filers in the UK, I find that earnings management decreases for private firms that voluntarily file their financial statements in (i)XBRL. Moreover, earnings management reduction is larger for private stand-alone firms rather than for private business groups. My analyses further show that the effects are more pronounced for firms that are not audited by a Big Four auditor. Collectively, the findings imply that earnings management can be constrained through reduced information processing costs induced by the digital reporting filing format (i)XBRL.