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Journal of Management Analytics Volume 4, 2017 - Issue 2
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Articles

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
Pages 145-158 | Received 15 Aug 2016, Accepted 21 Feb 2017, Published online: 24 Apr 2017
 
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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.

Disclosure statement

No potential conflict of interest was reported by the authors.

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