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Does Information-Processing Cost Affect Firm-Specific Information Acquisition? Evidence from XBRL Adoption

Published online by Cambridge University Press:  10 June 2016

Yi Dong ,
Oliver Zhen Li ,
Yupeng Lin  and
Chenkai Ni
Yi Dong
Affiliation:
[email protected], Shanghai University of Finance and Economics, School of Accounting, Shanghai 200433, China
Oliver Zhen Li
Affiliation:
[email protected], National University of Singapore, Business School, Singapore 119245, Singapore
Yupeng Lin
Affiliation:
[email protected], City University of Hong Kong, College of Business, Kowloon, Hong Kong
Chenkai Ni*
Affiliation:
[email protected], Renmin University of China, School of Business, Beijing 100872, China.
*
*Corresponding author: [email protected]
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Abstract

We examine how information-processing cost affects investors’ acquisition of firm-specific information using a natural experiment resulting from a recent mandate requiring U.S. firms to adopt eXtensible Business Reporting Language (XBRL) when submitting filings to the U.S. Securities and Exchange Commission (SEC). XBRL filings make financial data standardized, tagged, and machine readable. We find that XBRL adoption reduces firms’ stock return synchronicity. The reduction in synchronicity mainly applies to filings under the mandatory program as opposed to the voluntary program. Furthermore, such an effect is more pronounced for opaque and complex firms. Finally, we find that XBRL adoption also reduces price delay.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 2 , April 2016 , pp. 435 - 462
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

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