Does the XBRL Disclosure Management Solution Influence Earnings Release Efficiency and Earnings Management?

Implementation of eXtentible Business Reporting Language (XBRL) into corporate financial reporting processes has the potential to improve reporting efficiency and earnings quality (cf., Gunn 2007; Pinsker et al. 2005; Roohani et al. 2009). However, whether XBRL enables more or less misstatement and efficient reporting might be contingent on the strategy adopted by companies to implement XBRL (Garbellotto 2009). This study investigates whether adopting Disclosure Management Solution (DMS) strategy for XBRL implementation improves public companies earnings release efficiency and mitigates earnings management activities. Using a unique proprietary survey database along with financial data from COMPUSTAT, we hypothesize and find that use of DMS for XBRL implementation is negatively associated with earnings release time lag, especially for companies that release good news, indicating improved earnings release efficiency. We also hypothesize and find that use of DMS for XBRL implementation is inversely related to accruals-based earnings management as measured by positive and absolute values of discretionary accruals, but positively related to real activities-based earnings management as measured by acceleration of the timing of sales, and reduction of discretionary expenses. These results should be of interest to regulators, investors, management, and other stakeholders to better comprehend the consequences of XBRL implementation on corporate financial reporting