Mandatory XBRL Adoption and Credit Default Swap Spreads

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Detail(s)

Original languageEnglish
Publication statusPublished - Jul 2017

Conference

Title13th Annual Conference of Asia-Pacific Association of Derivatives (APAD)
LocationParadise Hotel
PlaceKorea, Republic of
CityBusan
Period10 - 11 July 2017

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.

Research Area(s)

  • XBRL mandate, CDS market, credit spread, financial statement comparability, SEC regulation

Bibliographic Note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Citation Format(s)

Mandatory XBRL Adoption and Credit Default Swap Spreads. / Griffin, Paul A.; Hong, Hyun A.; Kim, Jeong-Bon; Lim, Jee-Hae.

2017. Paper presented at 13th Annual Conference of Asia-Pacific Association of Derivatives (APAD), Busan, Korea, Republic of.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review