Responses of Small and Large Investors to XBRL Disclosure to the SEC

• In Event: Accounting Information Systems 1

Abstract

Abstract: The Securities and Exchange Commission (SEC) mandated in 2008 that financial reports of public companies be prepared in interactive format using the eXtensible Business Reporting Language (XBRL). The new reporting requirements were to be implemented by 2011.
On one hand, the SEC asserts that the XBRL disclosure will reduce informational barriers that separate smaller and less sophisticated investors from larger and more sophisticated investors, thereby reducing information asymmetry. On the other hand, the SEC also points out that larger investors are likely to gain significant benefits from XBRL (SEC 2009a). Using intra-day trading data, this study examines the changing pattern in the responses of small and large investors to XBRL disclosure as evidenced by trading outcomes. Empirical results suggest that large investors and small investors respond to XBRL filings negatively in the first two years of the three-year phase-in, and respond positively in the third year, consistent with the improvement in the quality of XBRL filings documented in prior literature (e.g., Du et al. 2012), suggesting a significant learning curve. Evidence provided by this study could potentially assist the SEC in its effort to assess the impact of XBRL disclosure on investors.

Author

• Shiyou Li, Texas A&M University - Commerce