Track 8: Research on XBRLInteractive data and investor decision

makingJoanne Locke, Alan Lowe and Andy Lymer

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The support of the ICAEW’s charitable trust is gratefully acknowledged.

We would also like to thank the participants and software vendors who offered assistance.

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Experiment Students as proxies for retail investors Two investment decisions, one using PDF and

one XBRL tagged data in Excel spreadsheet Each participant used both data formats

◦ 2 X 2 within subjects, repeated measures experiment design

◦ Randomised which data format they used first Information embedded in the footnotes

should be integrated into the decision

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Important to consider users (investors) Surveys of users return consistently results

of low awareness of XBRL (even professional analysts)

Only way at the moment is to use experiments since XBRL is not widely known or used by investors

Tendency by regulators, software vendors etc.. to ‘speak on behalf of’ investors without supporting research

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Important to think about what functionality to include in the experimental setting◦ ‘Searchability’ (Hodge et al, 2004 ) is too basic –

can do that in PDF. We did do:

Automatic calculation of ratios (fixed format) Linking to narrative information (footnotes) Display tags (reference information) Full statements with links to notes too

We didn’t do because of technical difficulties: Web search and download Customisable template for analysis

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Important to think about number of companies to analyse – we included on two sets of two companies

Trade-off between realistically long reports and time participants/investors prepared to take

Important to get information about why they made the decision they did – some were not using the expected investment decision making model

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Group A

Used PDF first

Group B

Used XBRL first

Results using PDFNumber who chose disclosure company (‘correct’ choice) 13 13Number who chose recognition company 9 9Total 22 22Percentage ‘correct’ 59 59Average percentage of funds invested in disclosure company

53 51

Standard deviation 18.6 16Results using XBRL

Number who chose disclosure company (‘correct’ choice) 14 15Number who chose recognition company 8 7Total 22 22Percentage ‘correct’ 64 68Average percentage of funds invested in disclosure company

54 55

Standard deviation 18.9 16.1

ResultsResults

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PerceptionPDF Format Interactive Data Format

Count Percentage Count Percentage

Negative 28 62 3 7

Negative about analysisbut positive presentation 11 25 6 13

Positive 6 13 36 80

Total 45 100 45 100

Perception of ‘interactive data’ overwhelmingly positive, but no impact on decision making◦ Automatic ratio calculation

Perceived as more ‘accurate’ Less motivation to integrate footnote information?

◦ 24% still preferred look and feel of PDF ‘real’ financial report

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Tools and analytic packages that act as an interface between interactive data and investors must be well designed to encourage integration of narrative and financials – otherwise XBRL may not result in better decisions

Carefully constructed experiments are potentially useful

We need a deeper understanding of retail investors’ needs and decision making approaches – lots of research – preferably with ‘real’ investors

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