XBRL and Investor Disclosure Processing Costs

Prof. Vernon J. Richardson
Distinguished Professor of Accounting, University of Arkansas

Date: 25 March 2024 (Monday)
Time: 10:30 am to 12:00 pm
Venue: E22-G008
Host: Prof. Jason XIAO, Professor in Accounting


This research addresses two competing and unresolved views of the impact of eXtensible Business Reporting Language (XBRL) on investor disclosure processing costs. The SEC (2009) contends that XBRL technology reduces investors’ disclosure processing costs by improving access to and analysis of financial information. Alternatively, the sheer quantity of XBRL tags can introduce complications that increase disclosure processing costs (Hoitash and Hoitash 2018). We first use return volatility to proxy for disclosure processing costs, since increased complexity implies a corresponding increase in disclosure processing costs, increased investor uncertainty, and higher return volatility. Consistent with SEC contentions, we find that XBRL total and standard tag counts are reliably negatively related to post-filing return volatility. Conversely, XBRL extension tag counts are positively related to return volatility. We then validate these results by examining the relation between standard and extension XBRL tags and analyst forecast dispersion. Again, the use of standard tags (extension tags) reduces (increases) forecast dispersion and corresponding disclosure processing costs. Finally, building on prior research linking both return volatility and analyst forecast dispersion with subsequent market returns, we find that firms with more XBRL standard tags (extension tags) have higher (lower) future returns following XBRL filings.



Vernon J. Richardson is Distinguished Professor of Accounting and the W. Glezen Chair in the Sam M. Walton College of Business at the University of Arkansas. He received his BA, MAcc, and MBA from Brigham Young University and a PhD in accounting from the University of Illinois at Urbana Champaign. He has taught at the University of Arkansas, Aarhus University, Baruch College, Brigham Young University, Chinese University of Hong Kong Shenzhen, Baruch College, University of Kansas, Xi’an Jiaotong Liverpool University and China Europe International Business School (Shanghai).  He has co-authored four McGraw Hill textbooks, including “Accounting Information Systems”, “Data Analytics for Accounting”, “Introduction to Data Analytics for Accounting”, and “Introduction to Business Analytics”, and is working on additional textbooks in the Cost Accounting and Financial Statement Analysis areas.  His research activity focuses IT Investments and Data Analytics and his teaching interests are Data Analytics, Financial Accounting and Financial Statement Analysis.

 All are welcome!