Leveling the Playing Field between Large and Small Institutions: Evidence from the SEC's XBRL Mandate
Posted: 20 Nov 2017
Date Written: October 2017
We investigate how XBRL adoption affects smaller institutions’ access to financial statement information relative to their larger counterparts. We examine three aspects of trading responsiveness: abnormal trading volume, response speed to 10-K information, and decision to trade immediately following the 10-K filing. With regard to all three aspects of trading responsiveness, we find that small institutions’ responsiveness to 10-K news increases significantly more relative to the change experienced by large institutions from the pre- to post-XBRL periods. We further document that small institutions’ stock picking skills in the 10-K filing period increase more compared to those of large institutions following the regulation. Our results are robust to a battery of falsification and sensitivity tests. Collectively, our results suggest that the informational playing field between small and large institutions has become more even following the SEC’s XBRL mandate.
Keywords: XBRL, Analysts, Institutions, Information Asymmetry
JEL Classification: G11, G24, M48
Suggested Citation: Suggested Citation