Impact of XBRL adoption on financial reporting quality: a global evidence

Abstract

Purpose This paper aims to examine the effect of eXtensible Business Reporting Language (XBRL) adoption on financial reporting quality at the country-level (developing and developed countries). Design/methodology/approach This study uses data from 98 developed and developing countries between 2005 and 2018. This study collected data from various sources such as the World Economic Forum, World Development Indicators, World Governance Indicators and XBRL website. Findings The results show that XBRL is associated with an increased financial reporting quality. However, the relationship is stronger in developing countries than in developed countries. This study also finds that the results remain the same after accounting for years of XBRL experience and the effect of accounting globalisation. The results are consistent with the assumption that XBRL-formatted financial statements improve information efficiency through increased searching efficiency, quality of display and comparability. The results are robust to alternative econometric modifications such as controlling for country, year effects and endogeneity. Practical implications The results can potentially assist the XBRL promoters and regulators in expeditiously assessing the benefits of XBRL and advocating its adoption by many countries. The findings offer more motivations for regulators around the world to mandate this new filing standard format. Originality/value This study contributes to the literature by providing empirical evidence on the consequences of XBRL at the country level. This study provides evidence on an important question of whether the XBRL, new information technology in the accounting field, can play a useful role in improving financial reporting.

هل یؤدی التطبیق الإلزامی لـ XBRL إلى تحسین جودة الأرباح المبلغ عنها؟ دراسة تطبیقیة على الشركات المدرجة فی سوق الأوراق المالیة السعودیة(باللغة الانجلیزیة)

“…One possible explanation for this finding is that the effects of XBRL adoption in developed countries may be differ from those in developing countries due to a lower level of institutional quality. This is in line with Tawiah and Borgi (2022) who found that the effect of XBRL adoption on the quality of financial reporting differs between developed and developing countries.…”

“…It is currently mandatory in many countries and voluntary in others. In addition, XBRL is constantly progressing, and the number of XBRL-based projects is growing rapidly (Tawiah & Borgi, 2022).…”

The influence of XBRL technology on the quality of financial reporting: exploring mediating variables in the Indian context

“…The main theoretical contributions of this paper to technology in financial reporting, XBRL and accounting literature are that it sheds light on the influence of the use of technologies in the business reporting process and their influence on various aspects of business reporting, which has only received confined focus from earlier studies so far (Siano et al, 2018;Bernardi, 2020;Abeywardana et al, 2022;Tawiah and Borgi, 2022). Thus, this study extends the research that examines the role of technology in enhancing the quality of business reporting.…”

“…For instance, many earlier studies (Geiger et al, 2014;Mao and Zhang, 2019;Hoitash et al, 2021;Ilias et al, 2020;Cormier et al, 2022) studied the use of XBRL for financial reporting, but their focus was on its functioning, efficiency, taxonomy design, benefits and opportunities. Only a few studies conceptually focused on XBRL and its influence on financial reporting quality (Tarmidi and Roni, 2014;Al-Ramahi et al, 2021;Tawiah and Borgi, 2022). Therefore, the present study is unique among XBRL literature and tries to analyse the influence of XBRL and its functionality on various aspects of financial reporting and its quality at large.…”

Integrating technology acceptance model with diffusion of innovation theory: an empirical investigation of the usage behaviour of XBRL-based Malaysia business reporting system

“…It solves significant challenges such as insufficient physical storage capacity, lengthy procedures, human error, delay and missing physical documentation [Companies Commission of Malaysia (CCM), 2019]. XBRL’s ability to accurately read and transfer the data into electronic communication devices can improve CCM comparability, auditing and monitoring processes (Tawiah and Borgi, 2022; Faccia et al , 2019).…”