Author Identifier (ORCID)
Abstract
The information processing costs faced by external investors may provide corporate insiders with a comparative advantage. We examine how the phased introduction of the eXtensible Business Reporting Language (XBRL) mandate, designed to lower investors' costs of processing public disclosures, affects insiders’ trading profitability. We find that opportunistic insider sales, but not purchases, become significantly less profitable following the first wave of mandatory XBRL adoption. This decline is consistent with a reduced number of insider sales preceding 10-K filings that convey unfavorable news, as well as with a general fall in insider trading activity and profitability across all three mandate waves. Further analysis reveals that the effect is most pronounced among firms with high levels of ex-ante information asymmetry proxied by a greater fraction of investors with less processing ability, less readable financial reports, and wider bid-ask spread, supporting the interpretation that reduced information asymmetry functions as the underlying channel. Our results remain consistent across a range of robustness checks.
Keywords
10-K filing, disclosure quality, information asymmetry, information processing costs, insider trading, XBRL
Document Type
Journal Article
Date of Publication
1-1-2026
Article Number
101941
E-ISSN
10958347
ISSN
08908389
Publication Title
The British Accounting Review
Publisher
Elsevier
School
School of Business and Law
RAS ID
100642
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Recommended Citation
Huang, Y., Parwada, J. T., Shan, Y. G., & Yang, J. W. (2026). Information-processing gap and insider trading profitability: Evidence from the XBRL mandate. The British Accounting Review. Advance online publication. https://doi.org/10.1016/j.bar.2026.101941