Share:


Does the adoption of extensible business reporting language impact the quality of financial reporting? The mediating role of the e-disclosure system

    Yaser Saleh Al Frijat Affiliation

Abstract

The study aimed to demonstrate the mediating role of the e-disclosure system (E-DS) in the relationship between the extensible business reporting language (XBRL) and the quality of financial reporting (FRQ), for the Jordanian companies listed at the Amman Stock Exchange (ASE). This study uses AMOS to perform structural equation modelling to analyze the data; survey data was gathered from 284 respondents working across various industries and sectors listed at the ASE; 229 usable responses were received. This study finds that XBRL is positively associated with the FRQ. Further, it is found that E-DS positively influences FRQ and plays a mediating role in the connection between XBRL and FRQ. The results of this study are expected to be of high quality regarding the preparation and presentation of financial statements by XBRL. Also, the study’s findings make original contributions to developing countries other than Jordan, which are expected to benefit.

Keyword : extensible business reporting language, quality of financial reporting, e-disclosure system, Jordan

How to Cite
Al Frijat, Y. S. (2024). Does the adoption of extensible business reporting language impact the quality of financial reporting? The mediating role of the e-disclosure system. Business: Theory and Practice, 25(2), 535–547. https://doi.org/10.3846/btp.2024.18652
Published in Issue
Oct 22, 2024
Abstract Views
63
PDF Downloads
44
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Abed, S. R. (2018). The perception of XBRL technology in the Jordanian context: An exploratory study. Research Journal of Applied Sciences, 13(1), 1–4. https://doi.org/10.36478/rjasci.2018.1.4

Abhishek, N., Ashok, M., & Divyashree M. (2018). XBRL – A tool for efficient disclosure of integrated corporate information. Asian Journal of Economics, Business and Accounting, 9(2), 1–8. https://doi.org/10.2139/ssrn.3317716

Abhishek, N., Ur Rahiman, H., Kulal, A., Kambali, U., Sibon Lobo, V., Bindu, D., & Divyashree, M. S. (2023). Impact of XBRL technology on quality of financial data: Mediating through various reporting aspects in India. In B. A. M. Alareeni & I. Elgedawy (Eds), Artificial Intelligence (AI) and finance. Studies in systems, decision and control (Vol. 488). Springer. https://doi.org/10.1007/978-3-031-39158-3_21

Albawwat, I. E., Al-Hajaia, M. E., & Al Frijat, Y. S. (2021). The relationship between internal auditors’ personality traits, internal audit effectiveness, and financial reporting quality: Empirical evidence from Jordan. The Journal of Asian Finance, Economics and Business, 8(4), 797–808.

Al Frijat, Y. S., Albawwat, I. E., & Elamer, A. A. (2024). Exploring the mediating role of corporate social responsibility in the connection between board competence and corporate financial performance amidst global uncertainties. Corporate Social Responsibility and Environmental Management, 31(2), 1079–1095. https://doi.org/10.1002/csr.2623

Alkayed, H., Zighan, S., Qabajeh, M., & Almaharmeh, M. I. (2023). The role of XBRL adoption on enhancing transparency of information disclosure: A case study of Jordanian financial companies. Cogent Business & Management, 10(3), Article 2265082. https://doi.org/10.1080/23311975.2023.2265082

Al-Okaily, M., Alkayed, H., & Al-Okaily, A. (2024). Does XBRL adoption increase financial information transparency in digital disclosure environment? Insights from emerging markets. International Journal of Information Management Data Insights, 4(1), Article 100228. https://doi.org/10.1016/j.jjimei.2024.100228

Al-Ramahi, N., Shahwan, Y., & Abuhussein, A. (2021). The impact of applying the XBRL on the quality of annual reports of the firms listed in Amman Stock Exchange. In 2021 22nd International Arab Conference on Information Technology (ACIT). IEEE. https://doi.org/10.1109/ACIT53391.2021.9677076

Al-Sakini, S. (2019). The impact of disclosure of the financial statements at the level of information asymmetry between investors: An empirical study on the commercial banks in Jordan. Academy of Accounting and Financial Studies Journal, 23(6).

Alwardat, Y. (2019). Disclosure quality and its impact on financial reporting quality, audit quality, and investors’ perceptions of the quality of financial reporting: A literature review. Accounting and Finance Research, 8(3). https://doi.org/10.5430/afr.v8n3p201

Alzoubi, E. S. S. (2016). Disclosure quality and earnings management: Evidence from Jordan. Accounting Research Journal, 29(4), 429–456. https://doi.org/10.1108/ARJ-04-2014-0041

Amman Stock Exchange. (2023.) XBRL | e-Disclosures System. https://www.ase.com.jo/

Apostolou, A., & Nanopoulos, K. A. (2009). Interactive financial reporting using XBRL: An overview of the global markets and Europe. International Journal of Disclosure and Governance, 6, 262–272. https://doi.org/10.1057/jdg.2009.3

Archambault, J. J., & Archambault, M. E. (2003). A multinational test of determinants of corporate disclosure. The International Journal of Accounting, 38(2), 173–194. https://doi.org/10.1016/S0020-7063(03)00021-9

Ashoka, M., Abhishek, N., & Divyashree, M. (2020). Extensible business reporting language and its impact on financial reporting and auditing. Pacific Business Review International, 12(8), 35–46.

Bagozzi, R. P., & Yi, Y. (2012). Specification, evaluation, and interpretation of structural equation models. Journal of the Academy of Marketing Science, 40(1), 8–34. https://doi.org/10.1007/s11747-011-0278-x

Baldwin, A. A., & Trinkle, B. S. (2011). The Impact of XBRL: A Delphi investigation. The International Journal of Digital Accounting Research, 11, 1–24. https://doi.org/10.4192/1577-8517-v11_1

Baldwin, A., Brown, C., & Trinkle, B. (2006). XBRL: An impacts framework and research challenge. Journal of Emerging Technologies in Accounting, 3(1), 97–116. https://doi.org/10.2308/jeta.2006.3.1.97

Benbouali, K., & Benberi, M. A. (2018). The importance of introducing electronic accounting disclosure using the XBRL language in activating the Algerian Stock Market. Journal of Accounting, Finance, and Auditing Studies, 4(1), 40–58.

Borgi, H., & Tawiah, V. (2022). Determinants of eXtensible business reporting language adoption: An institutional perspective. International Journal of Accounting & Information Management, 30(3), 352–371. https://doi.org/10.1108/IJAIM-11-2021-0242

Cauter, K. (2011). The Influence of XBRL on the quality of disclosures [Masters thesis, Erasmus University Rotterdam].

Chakraborty, J. K., & Sarkar, S. (2021). Examining the impact of revised XBRL mandate on the performance of firms in India. SEDME (Small Enterprises Development, Management & Extension Journal): A worldwide window on MSME Studies, 48(4), 330–340. https://doi.org/10.1177/09708464211069446

Cordery, C. J., Fowler, C. J., & Mustafa, K. (2011). A solution looking for a problem: Factors associated with the non-adoption of XBRL. Pacific Accounting Review, 23(1), 69–88. https://doi.org/10.1108/01140581111130634

Debreceny, R., Farewell, S., Piechocki, M., Felden, C., & Gräning, A. (2010). Does it add up? Early evidence on the data quality of XBRL filings to the SEC. Journal of Accounting and Public Policy, 29(3), 296–306. https://doi.org/10.1016/j.jaccpubpol.2010.04.001

Doolin, B., & Troshani, I. (2004). XBRL: A research note. Qualitative Research in Accounting & Management, 1(2), 93–104. https://doi.org/10.1108/11766090410813373

Faccia, A., Manni, F., & Capitanio, F. (2021). Mandatory ESG reporting and XBRL taxonomies combination: ESG ratings and income statement, a sustainable value-added disclosure. Sustainability, 13(16), Article 8876. https://doi.org/10.3390/su13168876

Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50. https://doi.org/10.1177/002224378101800104

Gandhi, S. (2010). XBRL and financial reporting taxonomy: A revolution in preparation, communication and analysis of electronic financial reports. Pearson.

Ghofar, A., & Saraswati, E. (2009). Problems in financial reporting: The analysis of quality of disclosure and the measurement system of the traditional accounting. SSRN. https://doi.org/10.2139/ssrn.1802916

Grant, H., & Conlon, J. (2006). EDGAR extraction system: An automated approach to analyze employee stock option disclosures. Journal Information System, 20(2), 119–142. https://doi.org/10.2308/jis.2006.20.2.119

Gunn, J. (2007). XBRL: Opportunities and challenges in enhancing financial reporting and assurance processes. Current Issues in Auditing, 1(1), A36–A43. https://doi.org/10.2308/ciia.2007.1.1.A36

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate data analysis (7th ed.). Pearson.

Henderson, C., Huerta, E., & Glandon, T. (2015). Standardizing the presentation of financial data: Does XBRL’s taxonomy affect the investment performance of nonprofessional investors? The International Journal of Digital Accounting Research, 15, 127–153. https://doi.org/10.4192/1577-8517-v15_5

Hentati, H., Maktouf, M., & Taktak, N. (2021). The behavioral intention to adopt XBRL in the accounting firms: Tunisian context. Journal of Accounting and Management Information Systems, 20(1), 132–153. https://doi.org/10.24818/jamis.2021.01006

Holland, J. (1999). Financial reporting private disclosure and the corporate governance role of financial institutions. Journal of Management & Governance, 3, 161–187. https://doi.org/10.1023/A:1009991609633

Hsieh, T., & Bedard, J. C. (2018). Impact of XBRL on voluntary adopters’ financial reporting quality and cost of equity capital. Journal of Emerging Technologies in Accounting, 15(2), 45–65. https://doi.org/10.2308/jeta-52235

Hu, L.-t., & Bentler, P. M. (1998). Fit indices in covariance structure modeling: Sensitivity to under parameterized model misspecification. Psychological Methods, 3(4), 424–453. https://doi.org/10.1037/1082-989X.3.4.424

Hwang, S., No, W. G., & Kim, J. (2020). XBRL mandate and timeliness of financial reporting: The effect of internal control problems. Journal of Accounting, Auditing & Finance, 36(3). https://doi.org/10.1177/0148558X20929854

International Accounting Standards Board. (2023). Global financial and sustainability reporting news. IASB.

Jameel, A. (2022). Electronic disclosure by employing the XBRL and its effect upon the quality of computerized accounting information: A field study in banks listed in the Iraqi Stock Exchange. International Journal of Contemporary Management and Information Technology, 2(6), 27–38.

Janvrin, D., & Mascha, M. F. (2010). The process of creating XBRL instance documents: A research framework. Review of Business Information Systems (RBIS), 14(2). https://doi.org/10.19030/rbis.v14i2.495

Jonas, G. J., & Blanchet, J. (2000). Assessing quality of financial reporting. Accounting Horizons, 14(3), 353–363. https://doi.org/10.2308/acch.2000.14.3.353

Kang, H. (2009). Analysis and application of structural equation model using SPSS/AMOS. Freedom Academy.

Kim, J., Kim, J. W., & Lim, J. (2019). Does XBRL adoption constrain earnings management? Early evidence from mandated U.S. filers. Contemporary Accounting Research, 36(4), 2610–2634. https://doi.org/10.1111/1911-3846.12493

Kline, R. B. (1998). Principles and practice of structural equation modeling. Guilford Press.

Kline, R. B. (2005). Principles and practice of structural equation modeling (2nd ed.). Guilford Press.

Kothari, S. P., Li, X., & Short, J. E. (2009). The effect of disclosures by management, analysts, and financial press on the equity cost of capital: A study using content analysis. The Accounting Review, 84, 1639–1670. https://doi.org/10.2308/accr.2009.84.5.1639

La Torre, M., Valentinetti, D., Dumay, J., & Rea, M. A. (2018). Improving corporate disclosure through XBRL: An evidence-based taxonomy structure for integrated reporting. Journal of Intellectual Capital, 19(2), 338–366. https://doi.org/10.1108/JIC-03-2016-0030

Liu, C., Wang, T., & Yao, L. J. (2014). XBRL’s impact on analyst forecast behavior: An empirical study. Journal of Accounting and Public Policy, 33(1), 69–82. https://doi.org/10.1016/j.jaccpubpol.2013.10.004

MacCallum, R. C., Browne, M. W., & Sugawara, H. M. (1996). Power analysis and determination of sample size for covariance structure modeling. Psychological Methods, 1(2), 130–149. https://doi.org/10.1037/1082-989X.1.2.130

Marsh, H. W., & Hocevar, D. (1985). Application of confirmatory factor analysis to the study of self-concept: First- and higher-order factor models and their invariance across groups. Psychological Bulletin, 97(3), 562–582. https://doi.org/10.1037/0033-2909.97.3.562

Martínez‐Ferrero, J., Garcia‐Sanchez, I. M., & Cuadrado‐Ballesteros, B. (2013). Effect of financial reporting quality on sustainability information disclosure. Corporate Social Responsibility and Environmental Management, 22(1), 45–64. https://doi.org/10.1002/csr.1330

Mbachu, C., Dim, C., & Ezeoke, U. (2017). Effects of peer health education on perception and practice of screening for cervical cancer among urban residential women in south-east Nigeria: A before and after study. BMC Women’s Health, 17, Article 41. https://doi.org/10.1186/s12905-017-0399-6

Murphy, S. (2022). Financial reporting automation: Benefits & best practices. Mesh. https://meshpayments.com/

Owusu Kwateng, K., & Darko, J. E. (2017). Total quality management practices in aquaculture companies: A case from Ghana. The TQM Journal, 29(4), 624–647. https://doi.org/10.1108/TQM-03-2017-0027

O’Riain, S., Curry, E., & Harth, A. (2012). XBRL and open data for global financial ecosystems: A linked data approach. International Journal of Accounting Information Systems, 13(2), 141–162. https://doi.org/10.1016/j.accinf.2012.02.002

Pajula, M. (2021). XBRL and disclosure management system implementation and their effect in group reporting process. CASE: Company XXXX [Master’s thesis, The University of Vaasa].

Perdana, A., Robb, A., & Rohde, F. (2015). An integrative review and synthesis of XBRL. Journal of Information Systems, 29(1), 115–153. https://doi.org/10.2308/isys-50884

Pivac, S., Vuko, T., & Cular, M. (2017). Analysis of annual report disclosure quality for listed companies in transition countries, Economic Research-Ekonomska Istraživanja, 30(1), 721–731. https://doi.org/10.1080/1331677X.2017.1311231

Qushtom, T. (2021). The expected effect of using eXtensible business reporting language (XBRL) on the extent of using ordinary financial statements by external users in Jordan. Academic Journal of Interdisciplinary Studies, 10(5). https://doi.org/10.36941/ajis-2021-0137

Ramin, K., & Reiman, C. (2013). IFRS and XBRL: How to improve business reporting through technology and object tracking. Wiley. https://doi.org/10.1002/9781119208099

Rawashdeh, B., & Rawashdeh, A. (2021). Factors influencing the usage of XBRL tools. Management Science Letters, 11(4), 1345–1356. https://doi.org/10.5267/j.msl.2020.11.005

Sahi, A. M., Sahi, A. A., Abbas, A. F., & Khatib, S. (2022). Financial reporting quality of financial institutions: Literature review. Cogent Business & Management, 9(1), Article 2135210. https://doi.org/10.1080/23311975.2022.2135210

Saragih, A. H., & Ali, S. (2022). The role of XBRL adoption on the association between managerial ability and corporate tax outcomes: Empirical evidence from Indonesia. Journal of Applied Accounting Research, 24(2). https://doi.org/10.1108/JAAR-10-2021-0267

Sassi, W., Ben Othman, H., & Hussainey, K. (2023). The determinants of eXtensible Business Reporting Language (XBRL) adoption: A cross-country study. International Journal of Disclosure and Governance, 21, 175–192. https://doi.org/10.1057/s41310-023-00192-6

Schermelleh-Engel, K., Moosbrugger, H., & Müller, H. (2003). Evaluating the fit of structural equation models: Tests of significance and descriptive goodness-of-fit measures. Methods of Psychological Research, 8(2), 23–74.

Securities and Exchange Commission. (2009). Interactive data to improve financial reporting. http://www.sec.gov/rules/final/2009/33-9002.pdf

Shatnawi, H. M. (2018). The role of electronic accounting disclosure in enhancing the financial reports quality and reducing the information asymmetry gap in the Jordanian business environment. Global Journal of Economics and Business, 5(3), 288–307. https://doi.org/10.31559/GJEB2018.5.3.4

Slehat, Y. (2018). Affecting factors on eXtensible Business Reporting Language (XBRL) adoption among public listed companies in Amman Stock Exchange. Australian Journal of Basic and Applied Sciences, 12(6), 36–40.

Steenkamp, L. P., & Nel, G. F. (2012). The adoption of XBRL in South Africa: An empirical study. The Electronic Library, 30(3), 409–425. https://doi.org/10.1108/02640471211241672

Suta, A., & Tóth, Á. (2020). XBRL utilization as an automated industry analysis. Hungarian Journal of Industry and Chemistry, 48(1), 131–138. https://doi.org/10.33927/hjic-2020-19

Tang, S., & Jia, L. (2011). AMOS: A new tool for management innovation in IT Industry. In M. Zhu (Eds), Electrical engineering and control. Lecture notes in electrical engineering (pp. 793–800). Springer. https://doi.org/10.1007/978-3-642-21765-4_99

Tarmidi, M., & Roni, R. A. (2014). An international comparison of the determinants and financial information quality in XBRL reporting environment. Procedia – Social and Behavioral Sciences, 164, 135–140. https://doi.org/10.1016/j.sbspro.2014.11.061

Tawfik, O., Hayek, A., & Al-Smadi, A. (2017). The extend of applying the extensible business reporting language at Jordanian industrial companies. International Review of Management and Marketing, Econjournals, 7(1), 1–10.

Tawiah, V., & Borgi, H. (2022). Impact of XBRL adoption on financial reporting quality: A global evidence. Accounting Research Journal, 35(6), 815–833. https://doi.org/10.1108/ARJ-01-2022-0002

Yassin, M., El-Barghouthi, S., & Al-Khatib, I. (2012). XBRL: The future of financial reporting in Jordan. In International Conference on Business Intelligence and Knowledge Economy (Vol., pp. 23–26). ResearchGate.

Yassin, M. (2017). The determinants of internet financial reporting in Jordan: Financial versus corporate governance. International Journal of Business Information Systems, 25(4), 526–556. https://doi.org/10.1504/IJBIS.2017.085176

Zamzam, A., & Qaffas, A. (2018). XBRL technologies for financial reporting in information systems. International Journal of Management and Information Technology, 13. https://doi.org/10.24297/ijmit.v13i0.7609