Track 8: Research on XBRL Interactive data and investor decision making Joanne Locke, Alan Lowe and Andy Lymer 1

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. 2

 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 3

 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 4

 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 5

 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 6

7 Group A Used PDF first Group B Used XBRL first Results using PDF Number who chose disclosure company (‘correct’ choice)13 Number who chose recognition company99 Total22 Percentage ‘correct’59 Average percentage of funds invested in disclosure company 5351 Standard deviation Results using XBRL Number who chose disclosure company (‘correct’ choice)1415 Number who chose recognition company87 Total22 Percentage ‘correct’6468 Average percentage of funds invested in disclosure company 5455 Standard deviation Results

8 Results Perception PDF FormatInteractive Data Format CountPercentageCountPercentage Negative Negative about analysis but positive presentation Positive Total

 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 9

 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 10