Please join us for the second installment of the 2023–2024 Asper School of Business Research Webinar Series: 

Human Readability of Disclosures in a Machine-Readable World

Presented by Dr. Andy Call

Friday, May 17^th, 2024
1:30 p.m. to 3:00 p.m. CDT
Zoom Webinar 

Please register at the link below: 

Presentation Abstract: 

While regulators emphasize the need for machine-readable corporate disclosures, we examine how improvements in machine readability affect the human readability of financial disclosures. Using the passage of the 2018 Inline XBRL (iXBRL) regulation that creates a positive shock to machine readability, we observe a substitution effect between machine readability and human readability. The substitution effect is more pronounced when firms have higher proprietary costs of disclosure, when firm performance is poor, when managers engage in higher earnings management, and when managers are subject to relatively weaker monitoring, consistent with opportunistic reductions in human readability arising when managers have incentives and opportunities to obfuscate information. In addition, the substitution effect is greater when firms are complex and when managers face increased workloads when responding to the iXBRL mandate. Furthermore, we document that retail investors, who generally have less ability to process corporate disclosures with machines and who are more reliant on human readability, reduce ownership in stocks impacted by the iXBRL regulation, and that these disclosures become less informative to retail investors. Our results are robust to a regression discontinuity design and alternative difference-indifferences designs. Overall, our findings indicate that improved machine readability has implications for the human processing of disclosures.

Andy Call joined the W. P. Carey School of Business in 2013 and is the Accountancy Professional Advisory Board Professor in the School of Accountancy. Professor Call researches various financial reporting topics, including the role of equity analysts in the capital markets and the role of whistleblowers in the discovery of financial misconduct. In the classroom, Professor Call teaches undergraduate and Ph.D. students. Prior to his appointment at ASU, Professor Call was on the faculty at the Terry College of Business at the University of Georgia.