XBRL-Formatted Financial Reporting and the Feedback Effect of Price
Journal
European Accounting Review
Journal Volume
35
Journal Issue
2
Start Page
479-502
ISSN
0963-8180
1468-4497
Date Issued
2026
Author(s)
Abstract
We examine whether the SEC’s XBRL-formatted financial reporting mandate allows investors to better process public financial information, reducing the extent to which managers learn private information from stock price. We find a significant decrease in the investment-price sensitivity for firms that started to file their 10-Ks in an XBRL format, consistent with a reduction in the cost of information processing crowding out private information in stock price. We also find that the decrease in the investment-price sensitivity associated with XBRL adoption is more pronounced for firms with higher business and information complexity and for firms with higher incentives for managers to learn from stock price. Overall, our results suggest that XBRL can reduce the feedback effect of stock price and impair real efficiency as it increases investors’ ability to synthesize and integrate financial data for analysis.
Subjects
Disclosure processing costs
Feedback effect of stock price
Managerial learning
XBRL
Publisher
Informa UK Limited
Type
journal article