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

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.