The Impact of Information Processing Costs on Firm Disclosure Choice: Evidence from the XBRL Mandate
66 Pages Posted: 17 Jan 2019 Last revised: 22 Mar 2019
Date Written: March 2019
This paper examines the effect of market participants’ information processing costs on firms’ disclosure choice. Using the recent eXtensible Business Reporting Language (XBRL) regulation, I find that firms increase their quantitative footnote disclosures upon implementation of XBRL detailed tagging requirements designed to reduce information users’ processing costs. These results hold in a difference-in-difference design using matched non-adopting firms as controls, as well as two additional identification strategies. Examination of the disclosure increase by footnote type suggests that both regulatory and non-regulatory market participants play a role in monitoring firm disclosures. Overall, these findings suggest that the processing costs of market participants can be significant enough to impact firms’ disclosure decisions.
Keywords: information processing costs, disclosure, XBRL
JEL Classification: M41, M48, D83, O33
Suggested Citation: Suggested Citation