No. 81: Does the story matter? Putting financial statement numbers into context using XBRL data

Abstract

Using XBRL data in a tax disclosure setting, we create a new measure of “discussed numbers” that captures the context of firms’ financial reporting—namely the qualitative discussion of numbers in financial statements. Regarding determinants, we show that our measure is indicative of managers explaining higher GAAP effective tax rates (ETRs) and greater volatility in both GAAP and cash ETRs. Regarding consequences, we find that discussing tax numbers generally, and uncertain tax benefits specifically, improves analyst forecast accuracy and reduces dispersion of implied ETRs. We confirm that the benefits to analysts manifest in sentences that explain tabulated numbers, and not only in sentences that simply contain or repeat numbers. Finally, we find incrementally lower forecast dispersion when firms discuss particularly unique numbers, as captured by non-standardized “extended” XBRL tags. Overall, this study enhances our understanding of corporate disclosure by explicitly measuring the interrelation of numerical values and narrative discussion.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin, der Goethe-Universität Frankfurt und der Carl von Ossietzky Universität Oldenburg, die die gleiche Forschungsagenda verfolgen.