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XBRL-Formatted Financial Reporting and the Feedback Effect of Price

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  • Young Jun Cho
  • Ying-Chi Huang
  • Holly Yang

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.

Suggested Citation

  • Young Jun Cho & Ying-Chi Huang & Holly Yang, 2026. "XBRL-Formatted Financial Reporting and the Feedback Effect of Price," European Accounting Review, Taylor & Francis Journals, vol. 35(2), pages 479-502, March.
    • Handle: RePEc:taf:euract:v:35:y:2026:i:2:p:479-502
    DOI: 10.1080/09638180.2025.2476131
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