The impact of XBRL on information asymmetry: evidence from loan contracting

Dazhi ChongSchool of Management, California Lutheran University, Thousand Oaks, CA, USACorrespondence[email protected]

Hui ShiDepartment of Management and Information Sciences, University of Southern Indiana, Evansville, IN, USA

Liuliu(Luna) FuDepartment of Information Systems, California State University, Los Angeles, CA, USA

Hao JiDepartment of Computer Science, California State Polytechnic University, Pomona, CA, USA

Gongjun YanDepartment of Management and Information Sciences, University of Southern Indiana, Evansville, IN, USA

Abstract

This paper examines whether and how the adoption of eXtensible Business Reporting Language (XBRL) reduces information asymmetry in loan contracting. We hypothesize that the adoption of XBRL can enhance information dissemination and mitigate the information asymmetry problem between borrowers and lenders. Using a sample of 554 US bank loan contracts, we find that borrowers who adopt XBRL enjoy more favourable price and non-price terms of bank loan contracts. Additional analyses indicate that the relations among XBRL adoption and bank loan price vary with loan structure. Overall, this research provides evidence that technology advancements such as XBRL reduce cost of bank loans by decreasing information asymmetry between borrowers and lenders.

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The impact of XBRL on information asymmetry: evidence from loan contracting

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