Applying path analysis, we examine how eXtensible Business Reporting Language (XBRL) in China affects the cost of equity capital. Using a one-group pre- and post-test design, we find that XBRL reduces the cost of equity capital and that XBRL strengthens the direct linkage of the inverse relationship between financial reporting quality and the cost of equity capital but not the indirect linkage via the mediation of information asymmetry. Our findings also show that XBRL adoption leads to a greater reduction in the cost of equity capital, when there is a high level of corporate governance. Our study contributes to research on XBRL and to practice by documenting how XBRL affects the cost of equity capital.

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We investigate whether nonprofessional investors' responses to a company's reported earnings differ when management earnings guidance is presented as a goal or an expectation. We present 64 M.B.A. students and 262 MTurk participants with earnings guidance, manipulating between subjects whether management provides the guidance as a “goal” or an “expectation” and whether the company's reported earnings fall short or exceed investors' expectations as derived from management's earnings guidance. Our experimental results suggest that if earnings guidance is issued as a goal rather than as an expectation, investors respond less negatively when earnings fall short of investors' expectations, but not less positively when earnings exceed investors' expectations. Mediation analysis supports the interpretation that earnings falling short of investors' expectations leads investors to perceive managers as less competent and to be more disappointed when managers issue expectation rather than goal guidance, which in turn influences investors' attractiveness judgments of the company.

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Using a sample of ERP adopters among Chinese publicly listed firms and a one-group pre- and post-test design, this study examines the impact of dominant shareholdings on the relationship between Enterprise Resources Planning (ERP) systems and earnings quality. We use the absolute value of discretionary accruals as a proxy for earnings quality. We predict and find that as the dominant shareholdings increase, Chinese firms show a decrease in the absolute value of total discretionary accruals after ERP implementations. Furthermore, we find that after ERP implementations, discretionary short-term accruals decrease with higher dominant shareholdings, while discretionary long-term accruals increase with higher dominant shareholdings. Our study contributes to research and practice by documenting that dominant shareholdings in China can influence the impact of ERP implementations on earnings quality, suggesting that dominant shareholdings may induce dominant shareholders' self-serving incentives to influence firms' financial reporting via ERP implementations.