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

48 Pages Posted: 10 Jan 2013 Last revised: 31 Jul 2015

See all articles by Yi Dong

Yi Dong

Shanghai University of Finance and Economics

Oliver Zhen Li

National University of Singapore (NUS)

Yupeng Lin

National University of Singapore

Chenkai Ni

Fudan University

Date Written: June 2014

Abstract

We examine how information processing cost affects investors’ acquisition of firm-specific information using a natural experiment resulting from a recent mandate that US firms be required to adopt the eXtensible Business Reporting Language (XBRL) when submitting filings to the 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. Further, such an effect is more pronounced for opaque and complex firms. Finally, we find that XBRL adoption also reduces price delay.

Keywords: Information processing cost, stock return synchronicity, XBRL

JEL Classification: G12, G14, M41

Suggested Citation

Dong, Yi and Li, Oliver Zhen and Lin, Yupeng and Ni, Chenkai, Does Information Processing Cost Affect Firm-Specific Information Acquisition? - Evidence from XBRL Adoption (June 2014). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2198135 or http://dx.doi.org/10.2139/ssrn.2198135

Yi Dong

Shanghai University of Finance and Economics ( email )

Shanghai, Shanghai 200433
China

Oliver Zhen Li (Contact Author)

National University of Singapore (NUS) ( email )

Bukit Timah Road 469 G
Singapore, 117591
Singapore

Yupeng Lin

National University of Singapore ( email )

15 Kent ridge drive
Singapore
Singapore

HOME PAGE: http://sites.google.com/site/scottlinyupeng/

Chenkai Ni

Fudan University ( email )

Guoshun Road 670
Yangpu
Shanghai, Shanghai 200433
China

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