Skip to main content Accessibility help

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

  • Yi Dong (a1), Oliver Zhen Li (a2), Yupeng Lin (a3) and Chenkai Ni (a4)


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.


Corresponding author

*Corresponding author:


Hide All
Barth, M.; Kasznik, R.; and McNichols, M.. “Analyst Coverage and Intangible Assets.” Journal of Accounting Research, 39 (2001), 134.
Bertrand, M., and Mullainathan, S.. “Enjoying the Quiet Life? Corporate Governance and Managerial Preferences.” Journal of Political Economy, 111 (2003), 10431075.
Blankespoor, E. “The Impact of Investor Information Processing Costs on Firm Disclosure Choice: Evidence from the XBRL Mandate.” Working Paper, Stanford University (2012).
Blankespoor, E.; Miller, B.; andWhite, H.. “Initial Evidence on the Market Impact of the XBRL Mandate.” Review of Accounting Studies, 19 (2014), 14681503.
Chan, K., and Hameed, A.. “Stock Price Synchronicity and Analyst Following in Emerging Markets.” Journal of Financial Economics, 80 (2006), 115147.
Cohen, L., and Lou, D.. “Complicated Firms.” Journal of Financial Economics, 104 (2011), 383400.
Crawford, S.; Roulstone, D.; and So, E.. “Analyst Initiations of Coverage and Stock Return Synchronicity.” Accounting Review, 87 (2012), 15271553.
Dasgupta, S.; Gan, J.; and Gao, N.. “Transparency, Price Informativeness, and Stock Return Synchronicity: Theory and Evidence.” Journal of Financial and Quantitative Analysis, 45 (2010), 11891220.
Dechow, P., and Dichev, I.. “The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors.” Accounting Review, 77 (2002), 3559.
Durnev, A.; Morck, R.; and Yeung, B.. “Value Enhancing Capital Budgeting and Firm-Specific Stock Return Variation.” Journal of Finance, 59 (2004), 14611493.
Durnev, A.; Morck, R.; Yeung, B.; and Zarowin, P.. “Does Greater Firm-Specific Return Variation Mean More or Less Informed Stock Pricing?” Journal of Accounting Research, 41 (2003), 797836.
Fernandes, N., and Ferreira, M.. “Does International Cross-Listing Improve the Information Environment?” Journal of Financial Economics, 88 (2008), 216244.
Ferreira, M., and Laux, P.. “Corporate Governance, Idiosyncratic Risk, and Information Flow.” Journal of Finance, 62 (2007), 951989.
Fox, M.; Durnev, A.; Morck, R.; and Yeung, B.. “Law, Share Price Accuracy, and Economic Performance: The New Evidence.” Michigan Law Review, 102 (2003), 331386.
Ghosh, D., and Whitecotton, S.. “Some Determinants of Analysts’ Forecast Accuracy.” Behavioral Research in Accounting, 9 (1997), 5068.
Grossman, S., and Stiglitz, J.. “On the Impossibility of Informationally Efficient Markets.” American Economic Review, 70 (1980), 393408.
Hou, K., and Moskowitz, T.. “Market Frictions, Price Delay, and the Cross-Section of Expected Returns.” Review of Financial Studies, 18 (2005), 9811020.
Hutton, A.; Marcus, A.; and Tehranian, H.. “Opaque Financial Reports, R 2, and Crash Risk.” Journal of Financial Economics, 94 (2009), 6786.
Iliev, P. “The Effect of SOX Section 404: Costs, Earnings Quality, and Stock Prices.” Journal of Finance, 65 (2010), 11631196.
Jin, L., and Myers, S.. R 2 around the World: New Theory and New Tests.” Journal of Financial Economics, 79 (2006), 257292.
Jones, J. “Earnings Management during Import Relief Investigation.” Journal of Accounting Research, 29 (1991), 193228.
Kim, J., and Shi, H.. “IFRS Reporting, Firm-Specific Information Flows, and Institutional Environments: International Evidence.” Review of Accounting Studies, 17 (2012), 474517.
Li, B.; Rajgopal, S.; and Venkatachalam, M.. R 2 and Idiosyncratic Risk Are Not Interchangeable.” Accounting Review, 89 (2014), 22612295.
Li, O.; Lin, Y.; and Ni, C.. “Does XBRL Adoption Reduce the Cost of Equity Capital?” Working Paper, National University of Singapore (2012).
Liu, M. “Analysts’ Incentives to Produce Industry-Level versus Firm-Specific Information.” Journal of Financial and Quantitative Analysis, 46 (2011), 757784.
Luo, Y. “Consumption Dynamics under Information Processing Constraint.” Review of Economic Dynamics, 11 (2008), 366385.
Luo, Y. “Rational Inattention, Long-Run Consumption Risk, and Portfolio Choice.” Review of Economic Dynamics, 13 (2010), 843860.
Maggio, M., and Pagano, M.. “Financial Disclosure with Costly Information Processing.” Working Paper, Columbia University and University of Naples Federico II (2012).
Morck, R.; Yeung, B.; and Yu, W.. “The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements?” Journal of Financial Economics, 58 (2000), 215260.
Peng, L. “Learning with Information Capacity Constraints.” Journal of Financial and Quantitative Analysis, 40 (2005), 307329.
Peng, L., and Xiong, W.. “Investor Attention, Overconfidence and Category Learning.” Journal of Financial Economics, 80 (2006), 563602.
Piotroski, J., and Roulstone, B.. “The Influence of Analysts, Institutional Investors, and Insiders on the Incorporation of Market, Industry, and Firm-Specific Information into Stock Prices.” Accounting Review, 79 (2004), 11191151.
Roll, R. R 2.” Journal of Finance, 43 (1988), 541566.
Securities and Exchange Commission. “XBRL Voluntary Financial Reporting on the EDGAR System.” (2005).
Securities and Exchange Commission. “Interactive Data to Improve Financial Reporting.” (2009).
Sims, C. A. “Implications of Rational Inattention.” Journal of Monetary Economics, 50 (2003), 665690.
Sims, C. A. “Rational Inattention: Beyond the Linear-Quadratic Case.” American Economic Review, 96 (2006), 158163.
Thistlethwaite, D., and Campbell, D.. “Regression–Discontinuity Analysis: An Alternative to the Ex Post Facto Experiment.” Journal of Educational Psychology, 51 (1960), 309317.
Veldkamp, L. “Information Markets and the Comovement of Asset Prices.” Review of Economic Studies, 70 (2006), 823845.

Related content

Powered by UNSILO

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

  • Yi Dong (a1), Oliver Zhen Li (a2), Yupeng Lin (a3) and Chenkai Ni (a4)


Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed.