The impact of XBRL adoption on local bias: Evidence from mandated U.S. filers

Bing Li, Zhenbin Liu, Wei Qiang*, Bohui Zhang

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    3 Citations (Scopus)


    This paper investigates how eXtensible Business Reporting Language (XBRL) adoption affects the information advantage of local investors relative to their non-local counterparts. By employing the recent staggered SEC mandates of XBRL as a natural shock, we show that institutional investors’ local bias decreases after firms adopt XBRL when preparing their financial statements. These results hold in a difference-in-difference research design with firm and year fixed effects or using matched nonadopting firms as controls, as well as a regression discontinuity design. The impact of XBRL adoption on reducing local bias can be explained by three economic channels: decreased information processing costs, increased corporate disclosures, and improved analyst coverage. We further find that institutions’ superior stock returns in geographic proximate equity investments significantly reduces after the XBRL mandate. The observed reduction in institutional investors’ local bias within U.S. companies following the XBRL mandate also applies to the international setting. Overall, our findings support regulators’ claim that XBRL adoption levels the playing field between local and non-local investors.

    Original languageEnglish
    Article number106767
    JournalJournal of Accounting and Public Policy
    Issue number6
    Publication statusPublished - 1 Nov 2020

    Scopus Subject Areas

    • Accounting
    • Sociology and Political Science

    User-Defined Keywords

    • Business reporting language
    • Institutional holdings
    • Local bias
    • XBRL


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