Abstract
This paper documents a negative relation between CDS spreads and the SEC’s mandate for registrants to file financial statements using eXtensible Business Reporting Language (XBRL). For financial statement users and others, this result means that post-XBRL-adoption CDS spreads dropped on average by 103–137 basis points, depending on the estimation model. We further confirm this relation by showing that CDS spreads decreased more for firms with lower accrual quality and greater organizational complexity in the pre-adoption period, and with more standardized official XBRL elements in the post-adoption period. These results conform to the incomplete accounting information model of Duffie and Lando (2001) and imply that the drop in CDS spreads following mandatory XBRL derives from (i) a reduction in firm default risk from better outside monitoring and (ii) an increase in the quality of information about firm default risk from lower information cost.
| Original language | English |
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| Publication status | Published - Jul 2017 |
| Event | 13th Annual Conference of Asia-Pacific Association of Derivatives (APAD) - Paradise Hotel, Busan, Korea, Republic of Duration: 10 Jul 2017 → 11 Jul 2017 https://www.conftool.net/apad2017/imprint.php http://www.kafo.or.kr/notice/view.asp?key=116 |
Conference
| Conference | 13th Annual Conference of Asia-Pacific Association of Derivatives (APAD) |
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| Place | Korea, Republic of |
| City | Busan |
| Period | 10/07/17 → 11/07/17 |
| Internet address |
Bibliographical note
Research Unit(s) information for this publication is provided by the author(s) concerned.Research Keywords
- XBRL mandate
- CDS market
- credit spread
- financial statement comparability
- SEC regulation
