Insider Profitability and Public Information: Evidence From the XBRL Mandate

45 Pages Posted: 2 Oct 2019 Last revised: 28 May 2020

See all articles by Yuyun Huang

Yuyun Huang

The University of Western Australia

Jerry T. Parwada

UNSW Business School; Financial Research Network (FIRN)

Yuan George Shan

The University of Western Australia - UWA Business School

Joey (Wenling) Yang

The University of Western Australia

Date Written: September 17, 2019

Abstract

Using XBRL as a quasi-natural experiment, we examine whether the mandated improvement on financial information presentation attenuates the profitability of insiders’ trades. We provide unique insights on how insiders profit from publicly available information. We find that XBRL adoption attenuates insider sale profits and has no effect on insider purchases. Further analyses reveal three channels through which the insiders extract informational advantage from publicly available information: the quantity, quality, and presentation of information. XRBL successfully disrupts these channels. Our results survive robustness tests including a regression discontinuity design, a matched sample difference-in-difference method, and placebo tests.

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

JEL Classification: G14, M48

Suggested Citation

Huang, Yuyun and Parwada, Jerry T. and Shan, Yuan George and Yang, Joey (Wenling), Insider Profitability and Public Information: Evidence From the XBRL Mandate (September 17, 2019). Available at SSRN: https://ssrn.com/abstract=3455105 or http://dx.doi.org/10.2139/ssrn.3455105

Yuyun Huang

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Jerry T. Parwada

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

UNSW
Sydney, NSW 2052
Australia

HOME PAGE: http://www.firn.org.au

Yuan George Shan

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia

Joey (Wenling) Yang (Contact Author)

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

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