Insider Profitability and Public Information: Evidence From the XBRL Mandate

Abstract

Using XBRL as a quasi-natural experiment, we examine the extent to which insiders profit from publicly available information. We find that the XBRL adoption attenuates insider sale profits and has no effect on insider purchases. Further analyses reveal three channels through which the adoption of XBRL attenuates insider profits: faster information incorporation, less reporting opacity, and more financial disclosure. Our results are robust to a battery of additional tests including different insider types, varied investment horizons, the regression discontinuity design, the matched sample difference-in-difference, and the placebo tests.

Keywords: XBRL, insider trading, information processing costs, public information

JEL Classification: G14, M48