Do managers use XBRL extension elements for impression management? Insights from XBRL tag name sentiment

Purpose The study aims to investigate whether firms opportunistically use eXtensible business reporting language (XBRL) extension elements to engage in impression management. Design/methodology/approach The authors use a quantitative research design using sentiment analysis to assess the tone of XBRL extension elements and standard tag names within firms’ financial reports. Unlike previous research that mainly explored the extent of extensions, this study uses sentiment mining on 3.68 million XBRL tag names to analyze how managers may use negative sentiment in extension tags to obscure unfavorable information. Findings They find that the tone of the customized extension tag names in a file is more negative than that of the standard tag names. Next, they show that this within-filing abnormal-negative sentiment of extension tag names over standard tag names is related to less persistent positive earnings and more persistent negative earnings as well as to higher analyst forecast error and dispersion. Ultimately, these findings suggest that managers exploit the customization of extension tags to obscure unfavorable information, making financial reports less comparable and more difficult for analysts and investors to interpret. Practical implications The findings are relevant to regulators worldwide considering the implementation or revision of XBRL reporting standards. These regulators must deal with the difficult task of whether to allow for extension elements, how to link them with standard elements and how to supervise their proper use. Originality/value This study’s originality lies in its innovative approach to examining XBRL extension elements by focusing on the sentiment of tag names rather than just the frequency of their use.