This study investigates whether information processing efficiency has an impact on public companies' investment efficiency. Using the adoption of XBRL as an exogenous shock that decreases information processing cost, we find that companies improve their investment efficiency after the adoption of XBRL. The effect is more pronounced for (1) firms that have inferior external monitoring, (2) firms that operate in more uncertain information environments, and (3) firms that have less readable financial reporting. In addition, we find a learning curve in investors' understanding of XBRL over time. After splitting firms into over-investment and under-investment groups, we conclude that the XBRL mandate is more likely to curb managers' opportunistic over-investments. Our study extends the XBRL literature by providing empirical evidence on the effects of XBRL adoption from the perspective of managers.

Data Availability: Contact the corresponding author at [email protected].

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