Reporting Technologies and Textual Readability: Evidence from the XBRL Mandate

Xitong Li (), Hongwei Zhu () and Luo Zuo ()
Additional contact information
Xitong Li: Department of Information Systems and Operations Management, École des hautes études commerciales de Paris (HEC Paris), 78351 Jouy-en-Josas, France
Hongwei Zhu: Department of Operations and Information Systems, Manning School of Business, University of Massachusetts, Lowell, Massachusetts 01854
Luo Zuo: Samuel Curtis Johnson Graduate School of Management, Cornell University, Ithaca, New York 14850

Information Systems Research, 2021, vol. 32, issue 3, 1025-1042

Abstract: Financial reporting technologies can significantly affect how firms construct and disseminate quantitative and qualitative disclosures. Leveraging the opportunity created by the eXtensible Business Reporting Language (XBRL) mandate in the United States, we use a difference-in-differences approach to examine whether and how a firm’s XBRL adoption affects the readability of its textual disclosures. We find that the initial adopters’ HTML-formatted annual reports become harder to read after the XBRL mandate. Further analysis reveals that this effect is concentrated among adopters with more quantitative disclosures, those with smaller firm size, and those with a higher level of financial complexity. Importantly, we show that managers’ reduced attention to preparing HTML-formatted annual reports, rather than increased disclosures, is likely the explanation for this decrease in textual readability. We also find that the negative effect on textual readability persists at least in the subsequent year. Taken together, our results suggest that although XBRL can standardize numerical disclosures, its initial adoption can divert managerial attention and result in reduced readability of textual disclosures.

Keywords: XBRL; reporting technologies; readability; limited attention; difference-in-differences (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://dx.doi.org/10.1287/isre.2021.1012 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:32:y:2021:i:3:p:1025-1042

Access Statistics for this article

More articles in Information Systems Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().