Digitalization of Financial Reporting Through XBRL and the Cost of Equity

Valentina Tohang, Silvi Lusiana


This study aims to explore the relation between the pre and post adoption of the Extensible Business Reporting Language (XBRL) adoption and the cost of equity capital in Indonesian-listed firms. The study examines 59 listed companies for four years, including two years before (2014-2015) and two years after (2016-2017) the adoption of XBRL in Indonesia. By comparing the pre and post adoption periods, the multiple regression analysis results will provide valuable information for the related stakeholders of the Indonesia Stock Exchange (IDX). Furthermore, this paper examines the impact of the control variables, such as the firm’s size, leverage, vari-ability of return, and price-to-book ratio to the relationship between XBRL and cost of equity (COE). The results show that XBRL adoption is significant in reducing the cost of equity and large-sized firms are more likely to enjoy greater reduction. This paper contributes to the research area by providing evidence on the relationship between XBRL adoption and COE in Indonesia that have mixed results in various countries and environments.


Cost of Equity, XBRL, Information Processing Cost, Qualitative Characteristics of Accounting Information

Full Text:



Aharon, D. Y., & Yagil, Y. (2019). The Impact of Financial Leverage on the Variance of Stock Returns. International Journal of Financial Studies, 7(1), 14.

Andirerei. (2019). Performance of Industrial Sectors in Indonesia Stock Exchange.

Arffa, R. C. (2001). Expert Financial Planning: Investment Strategies from Industry Leaders (Vol. 6). John Wiley & Sons.

Bai, Z., Sakaue, M., & Takeda, F. (2014). The Impact of XBRL Adoption On The Information Environment: Evidence from Japan. The Japanese Accounting Review, 4(2014), 49–74.

Birt, J. L., Muthusamy, K., & Bir, P. (2017). XBRL and the qualitative characteristics of useful financial information. Accounting Research Journal.

Blankespoor, E. A. (2012). The Impact of Investor Information Processing Costs on Firm Disclosure Choice: Evidence from the XBRL Mandate. [PhD Thesis].

Botosan, C. A., & Plumlee, M. A. (2005). Assessing alternative proxies for the expected risk premium. The Accounting Review, 80(1), 21–53.

Cekindo. (n.d.). The Consumer Goods Sector Remains Highly Attractive to Investors. Retrieved 25 August 2020, from

Chen, M., Qu, X., & Sun, X. (2017). Whose Cost of Equity Capital Reduces After Ifrs Convergence and Why? Heterogeneity Evidence From Chinese Stock Market. China Journal of Accounting Studies, 5(1), 1–27.

Chen, S., Harris, L., Li, W., & Wu, D. (2015). How does XBRL Affect the Cost of Equity Capital? Evidence from an Emerging Market. Journal of International Accounting Research, 14(2), 123–145.

Chen, S., Li, W., & Wu, D. (2014). How XBRL Affects the Cost of Equity Capital? Evidence from Emerging Market. Evidence from Emerging Market (January 1, 2014).

Chinbat, U., & Takakuwa, S. (2009). Using Simulation Analysis for Mining Project Risk Management. Proceedings of the 2009 Winter Simulation Conference (WSC), 2612–2623.

Coombes, P., & Watson, M. (2000). Three Surveys on Corporate Governance. The McKinsey Quarterly, 74.

Corporate Finance Institute. (n.d.). Financial Leverage.

Dhaliwal, D., Heitzman, S., & ZHEN LI, O. (2006). Taxes, leverage, and the cost of equity capital. Journal of Accounting Research, 44(4), 691–723.

Dhole, S., Lobo, G. J., Mishra, S., & Pal, A. M. (2015). Effects of the SEC’s XBRL mandate on financial reporting comparability. International Journal of Accounting Information Systems, 19, 29–44.

Doidge, C., Karolyi, G. A., & Stulz, R. M. (2007). Why do countries matter so much for corporate governance? Journal of Financial Economics, 86(1), 1–39.

Embong, Z., Mohd-Saleh, N., & Hassan, M. S. (2012). Firm size, disclosure and cost of equity capital. Asian Review of Accounting.

Fama, E. F., & French, K. R. (1992). The Cross-Section of Expected Stock Returns. The Journal of Finance, 47(2), 427–465.

Fama, E. F., & French, K. R. (1993). Common Risk Factors in the Returns on Stocks And Bonds. Journal Of.

Hao, L., Zhang, J. H., & Fang, J. B. (2014). Does Voluntary Adoption of XBRL Reduce Cost of Equity Capital? International Journal of Accounting and Information Management.

Hodge, F. D., Kennedy, J. J., & Maines, L. A. (2004). Does Search-facilitating Technology Improve the Transparency of Financial Reporting? The Accounting Review, 79(3), 687–703.

IDX. (2018). IDX Statistics 2017.

Indonesia Investments. (2018). Indonesia’s Purchasing Power, Retail Sales & Consumption on the Rise.

Indonesia Stock Exchange (IDX) Taxonomy 2014 Guidebook. (2014). The Indonesia Stock Exchange XBRL Team.

Janvrin, D. J., Pinsker, R. E., & Mascha, M. F. (2013). XBRL-enabled, Spreadsheet, or PDF? Factors Influencing Exclusive User Choice of Reporting Technology. Journal of Information Systems, 27(2), 35–49.

Kim, J. W., Lim, J.-H., & No, W. G. (2012). The Effect of First Wave Mandatory XBRL Reporting Across the Financial Information Environment. Journal of Information Systems, 26(1), 127–153.

Lee, E., Walker, M., & Zeng, C. (2013). Does IFRS Convergence Affect Financial Reporting Quality in China. ACCA Research Report, 131.

Lee, J., & Miller, D. (1996). Strategy, Environment and Performance in Two Technological Contexts: Contingency theory in Korea. Organization Studies, 17(5), 729–750.

Li, O. Z., Ni, C., & Lin, Y. (2012). Does XBRL Adoption Reduce the Cost of Equity Capital? Available at SSRN 2131001.

Li, S. (2010). Does Mandatory Adoption of International Financial Reporting Standards in the European Union Reduce the Cost of Equity Capital? The Accounting Review, 85(2), 607–636.

Liu, C., Luo, X. R., Sia, C. L., O’farrell, G., & Teo, H. H. (2014). The Impact of XBRL Adoption in PR China. Decision Support Systems, 59, 242–249.

Liu, C., Luo, X. R., & Wang, F. L. (2017). An Empirical Investigation on the Impact of XBRL Adoption on Information Asymmetry: Evidence from Europe. Decision Support Systems, 93, 42–50.

Mendeloff, J. M., Nelson, C., Ko, K., & Haviland, A. (2006). Small Businesses and Workplace Fatality Risk: An Exploratory Analysis (Vol. 371). Rand Corporation.

PwC Indonesia. (n.d.). Infrastructure in Indonesia. Retrieved 25 August 2008, from

Saleh, J. H., & Cummings, A. M. (2011). Safety in the Mining Industry and the Unfinished Legacy of Mining Accidents: Safety levers and defense-in-depth for addressing mining hazards. Safety Science, 49(6), 764–777.

Souitaris, V. (1999). Research on the Determinants of Technological Innovation: A contingency approach. International Journal of Innovation Management, 3(03), 287–305.

Suyatmini, S., & FN, A. S. (2014). Kajian tentang Konvergensi International Financial Reporting Standard (IFRS) di Indonesia. Jurnal Pendidikan Ilmu Sosial, 24(1), 79–86.

Szász, L., Demeter, K., Rácz, B.-G., & Losonci, D. (2020). Industry 4.0: A Review and Analysis of Contingency and Performance Effects. Journal of Manufacturing Technology Management. (2015). Kilas Balik 2015: Industri Properti Terhuyung.

Thampanya, N., Wu, J., Nasir, M. A., & Liu, J. (2020). Fundamental and Behavioural Determinants of Stock Return Volatility in ASEAN-5 countries. Journal of International Financial Markets, Institutions and Money, 65, 101193.

United States Department of Agriculture. (2020).

Vadakkanmarveettil, J. (2014, December 4). Understanding Dummy Variable Traps in Regression.

Yoon, H., Zo, H., & Ciganek, A. P. (2011). Does XBRL Adoption Reduce Information Asymmetry? Journal of Business Research, 64(2), 157–163.

Zamroni, M., & Aryani, Y. A. (2018). Initial Effects of Mandatory XBRL adoption Across the Indonesia Stock Exchange’s Financial Information Environment. Jurnal Keuangan Dan Perbankan, 22(2), 181–197.



  • There are currently no refbacks.

Abstracting & Indexing



Hasil gambar untuk ccby logo

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