The impact of tagging qualitative financial information on investor decision making: Implications for XBRL

Vicky Arnold, Jean C. Bedard, Jillian R. Phillips and Steve G. Sutton

International Journal of Accounting Information Systems, 2012, vol. 13, issue 1, 2-20

Abstract: This study extends prior research by investigating whether investors benefit from tagging complex narrative disclosures. We examine how tagging facilitates professional and nonprofessional investors' acquisition and assimilation of narrative disclosures in assessing company risk and predicting future performance. Participants were randomly assigned to a standard or tagged presentation of Management's Discussion and Analysis (MD&A), the U.S. equivalent to Management's Commentary. The two versions contain identical overall information. The standard version works similar to a PDF file where the user can access sections of the MD&A by selecting titled sections. The tagged version uses an extended hierarchical structure proposed for the MD&A and as a conceptual foundation for developing a related XBRL taxonomy. As theorized, results indicate that nonprofessional investors use a more directive search strategy under the tagged condition while professional investors' search strategies are unaffected by the tagged condition. Saliency of risk information increases for both investor groups in the tagged condition (i.e., risk assessments and stock price predictions are more associated). Our findings have important implications in light of the U.S. SEC's decision to preclude inclusion of XBRL-tagged MD&A information in mandatory filings due to taxonomy limitations.

Keywords: XBRL; Investment decisions; Risk; Material weakness; MD&A (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ijoais:v:13:y:2012:i:1:p:2-20

DOI: 10.1016/j.accinf.2011.12.002

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