An empirical investigation on the impact of XBRL adoption on information asymmetry: Evidence from Europe

Chunhui Liu, Xin (Robert) Luo, Fu Lee Wang

Research output: Contribution to journalArticlepeer-review

53 Citations (Scopus)


Given the high cost of developing and implementing data standards such as eXtensible Business Reporting Language (XBRL), it is critical to assess their influences before they are adopted on a large scale. The European Parliament has voted for the new Transparency Directive that calls for the mandatory preparation of annual business performance reports in a single electronic reporting from January 1, 2020 based on a cost–benefit analysis by European Securities and Markets Authority (ESMA), with due reference to current and future technological options such as XBRL. Regulators in many other jurisdictions such as Canadian Securities Administrators are also assessing the costs and benefits from XBRL adoption. This paper informs such analysis by examining whether the expected benefit of information asymmetry reduction is realized through XBRL adoption in a European context. XBRL adoption among European non-financial firms is found to significantly increase market liquidity and thus reduce information asymmetry. The association is stronger for larger firms that have sufficient resources and expertise to properly implement the technology. The empirical findings also suggest that the association is stronger for non-high-technology firms whose financial statements affected by XBRL are more reliant upon by investors. Based on these findings, XBRL evidences a viable option as an electronic reporting format with effective implementation for businesses.

Original languageEnglish
Pages (from-to)42-50
Number of pages9
JournalDecision Support Systems
Publication statusPublished - 1 Jan 2017
Externally publishedYes


  • Firm size
  • Information asymmetry
  • Information technology
  • Liquidity
  • Technology intensity
  • XBRL (eXtensible Business Reporting Language)


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