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

Yi Dong; Oliver Zhen Li; Yupeng Lin; Chenkai Ni

doi:10.1017/s0022109016000235

Journal of Financial and Quantitative Analysis Vol. 51 No. 2 2016

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

Yi Dong¹; Oliver Zhen Li ²; Yupeng Lin³; Chenkai Ni ⁴

¹ Shanghai University of Finance and Economics · ² National University of Singapore · ³ City University of Hong Kong · ⁴ Renmin University of China

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.

DOI: 10.1017/s0022109016000235
Volume: 51
Issue: 2
Pages: 435-462
Language: en
Sources: bibtex:phds-export.bib openalex crossref

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

Abstract

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