How Does XBRL Affect the Cost of Equity Capital? Evidence from an Emerging Market

Abstract

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.

PENGARUH PENERAPAN XBRL TERHADAP KETEPATAN WAKTU PELAPORAN KEUANGAN (Studi Empiris pada Indeks LQ45 di Bursa Efek Indonesia Tahun 2016-2018)

“…XBRL dikembangkan pada tahun 1998 oleh Charles Hoffman, dan pada tahun 2002 XBRL International, Inc didirikan. Teknologi XBRL tidak hanya mengintegrasikan informasi keuangan yang kompleks, tetapi juga membantu dalam analisis data laporan keuangan dan non-keuangan untun investor, pemegang obligasi, atau pengguna lain di pasar modal (Chen, Harris, Li, & Wu, 2015). Amerika mulai menerapkan XBRL secara sukarela pada tahun 2005 dan penerapan wajib pada tahun 2008.…”

“…Z. Li et al, (2012), Hao et al, (2014), Chen et al, (2015) dan Nurhasanah & Harahap, (2018) menunjukan bahwa dengan penerapan XBRL, laporan keuangan akan tersaji dengan format berstandar global sehingga pengguna khususnya investor dapat lebih fokus terhadap analisis informasi keuangan. Hal ini akan mempengaruhi kecepatan pemrosesan informasi di pasar modal yang memberikan dampak positif berupa kenaikan permintaan dari investor sehingga likuiditas saham meningkat, dan investor mengharapkan imbal balik yang rendah.…”

The Relevance of XBRL Voluntary Disclosure for Stock Market Valuation: The Role of Corporate Governance

“…Prior research on the impact and effectiveness of XBRL documents some significant effects of XBRL adoption. Chen, Harris, Li and Wu (), and Li et al (2012) find that XBRL adoption leads to a significant reduction in the cost of equity capital because of a decrease in information processing cost. Yoon et al () and Kim, Kim and Lim () have documented an impact of XBRL on information asymmetry.…”

Exploring the Egyptian accountants' awareness and understanding of XBRL

“…The first level of corporate reporting was traditional paper-based reporting, which became less useful for decision making as it is less timely, not very usable, and difficult to be reused electronically (Dunne et al, 2013). Vasarhelyi et al (2012) criticized traditional reporting by providing evidence that overwhelming data volume may force a user to make decisions based on incomplete information (see also, Chen et al, 2015). As a result, the second level of corporate reporting emerged with the use of technology to vary from the Hyper Text Markup Language (HTML), Portable Document Format (PDF), online Excel and Word documents, the first generation (FG) of online reporting, and finally, the most promising financial reporting language: eXtensible Mark-up Language (XML) and eXtensible Business Reporting Language (XBRL) (Chen et al, 2015;Srivastava and Kogan, 2010).…”