Digital corporate reporting and value relevance: evidence from the US and Japan

Yuan George Shan and Indrit Troshani

International Journal of Managerial Finance, 2020, vol. 17, issue 2, 256-281

Abstract: Purpose - The study improves current understanding concerning the implications of digital corporate reporting technology on the informativeness of accounting information. Design/methodology/approach - It looks at how XBRL, an exemplar digital corporate financial reporting technology, affects value relevance of accounting information in the US and Japan, two key jurisdictions where XBRL has been mandated. We operationalise stock price and return value relevance models to assess and compare predicted associations between selected accounting measures and market value of equity in these countries. Findings - We predict that the selected accounting measures are more value relevant after XBRL was mandated than before. We find evidence to support our prediction for the US sample. We also predict and find that the contribution of XBRL to the value relevance of the selected accounting measures is greater in the US than in Japan. Overall, our evidence provides support that digital corporate reporting technology enhances relevance and reliability of accounting measures. Originality/value - The study appears to be the first to have examined the impact of XBRL on value relevance whilst comparing between two major jurisdictions. The study extends emerging but limited literature concerning the benefits of digital corporate financial reporting for enhancing the communication between firms and users of financial information. The findings are useful to both users of financial information and standard setters.

Keywords: Digital corporate reporting; XBRL; Value relevance (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:ijmf-01-2020-0018

DOI: 10.1108/IJMF-01-2020-0018

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