Determinants of eXtensible business reporting language adoption: an institutional perspective

• DOI: https://doi.org/10.1108/IJAIM-11-2021-0242
• Published date: 30 March 2022
• Date: 30 March 2022
• Pages: 352-371
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Hela Borgi,Vincent Tawiah

Determinants of eXtensible

business reporting language

adoption: an institutional

perspective

Hela Borgi

Department of Accounting/College of Business and Administration,

Princess Nourah bint Abdulrahman University, Riyadh, Saudi Arabia, and

Vincent Tawiah

DCU Business School, Dublin City University, Dublin, Ireland

Abstract

Purpose –This paper aims to examine the institutionalfactors that inf‌luence the adoption of eXtensible

BusinessReporting Language (XBRL) at the country level.

Design/methodology/approach –The authors use a large sample of 175 developed and developing

countries over14 years. Data is obtained from different sourcesincluding, World Development Indicators, the

Reportson the Observance of Standards and Codes (ROSC) website and the Quality of Governmentdatabase.

Findings –The results highlight the signif‌icanceof coercive, mimetic and normative pressuresin terms of

ROSC reports, theextent of accounting globalisation and education. However,in further analyses, the authors

found that coercive pressure is pronounced in developing countries. Nevertheless, mimetic pressure is an

important,inf‌luential factor for all countries regardlessof their status as developed or developing.

Originality/value –This study responds to the lack of researchon the country-level factors of countries’

adoption of XBRL. The present study contributes to the literature by providing additional evidence on the

country-level factorsinf‌luencing XBRL adoption. Using the institutional theory, the authors provide a better

understanding of the global diffusion of XBRL, which has attracted little attention. The study also

complementsprior literature on the adoption of internationalaccounting and f‌inancial reportingpractices.

Keywords XBRL, Financial reporting, Institutional theory, Accounting system

Paper type Research paper

1. Introduction

The eXtensible Business Reporting Language (XBRL) is an open standard for preparing,

communicating, exchanging and analysing business information over the internet (Alkhatib

et al., 2019;Eierle et al., 2014). XBRL enables f‌irms to f‌ile one set of information instead of f‌iling

it repeatedly in different forms to professional organisations and government agencies for

many purposes (Sinnett and Willis, 2009). Many regulators and professional organisations

have recognised the XBRL as a standardised format for electronic f‌inancial reporting with

more benef‌its in the creation, preparation, exchange, analysis and communication of business

information than other reporting formats (e.g. Word, Excel, PDF, XTML).

Adopting XBRL technology in the f‌inancial reporting process signals better disclosure

and lower information asymmetry (Kim et al.,2012). This leads to a reduction in the cost of

capital, increased f‌irm value (Premurosand Bhattacharya, 2008) and an improved business-

to-government reportingprocess (Liu et al.,2017). These benef‌its are essential in the context

IJAIM

30,3

352

Received30 November 2021

Revised7 February 2022

Accepted28 February 2022

InternationalJournal of

Accounting& Information

Management

Vol.30 No. 3, 2022

pp. 352-371

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-11-2021-0242

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

of dealing with problems related to transparency and accountability of f‌inancial reporting.

Globally, regulatorsare using XBRL to improve the transparency of capital for investors [1].

Despite these acclaimed benef‌its, little is known about factors driving countries to adopt

XBRL (Perri and Allko, 2015;Steenkamp and Nel, 2012;Sassi et al., 2021). Some scholars

have called for comparative analysis of XBRL adoption in different countries (Bartolacci

et al., 2021). Hence, the essential thrustof this paper is to investigate factors inf‌luencing the

adoption of XBRL in both developedand developing countries.

Following prior studieson the dynamics of adopting international standards (Judgeet al.,

2010;Hassan et al.,2014;Boolakyand Soobaroyen, 2017;Boolaky et al.,2020),we draw from

the institutional theory to explain the determinantsof XBRL. According to the institutional

perspective, countries are conceptualised as social actors that seek to gain or maintaintheir

legitimacy, and as such, they are subject to international and national forces. These forces

bring about a wide array of pressures that shift nation-states towards the adoption of

similar practices (i.e. isomorphism) within a determined institutionalised environment of

global norms, customs and rules of governance (Alon and Dwyer, 2014;Chua and Taylor,

2008;Hopper et al.,2017). DiMaggio and Powell (1983) classif‌ied these forces as coercive,

mimetic and normative. These institutional factors (i.e. forces) could play a key role in

adopting world-accepted models such as XBRL (Touron, 2005;Judge et al.,2010), and it is

essential for the regulators and researchers to have a better understanding of these

inf‌luences. Ramanna and Sletten (2014) arguethat the adoption of new accounting systems

in f‌irms is associated with a country’s internal politics, e.g. ideology-driven policymakers

and special interest groups. Other research also notices the lack of knowledge of XBRL in

several countries (Perri and Allko, 2015;Steenkamp and Nel, 2012;Sassi et al., 2021). More

recently, Bartolacci et al. (2021) called for research on comparative analysis of XBRL

adoption in differentcountries. They suggest that it could provide a better understanding of

how regulators use XBRL in different contextsand why some countries have opted to make

it mandatory. Therefore, studyingthe determinants of countries’adoption of new standards

contributes to an improvedunderstanding of the adoption process.

We used a large sample of 175 developed and developing countries between 2005 and

2018. Our sample size and period yielded a minimum of 1,452 observations in the regression

estimations. Data is obtained from different sources, including World Development

Indicators, the World Bank website, International Financial Reporting Standards (IFRS)

Foundation, International Federation of Accountants (IFAC) membership prof‌ile and

Quality of Government database. These different sources are widely used in accounting

studies (Borgi and Mnif, 2022;Kaya and Koch,2015;Sellami and Borgi, 2020;Boolaky et al.,

2020), as they provide a consistentand reliable database available to all stakeholders.Using

different sourcesis also necessary for the robustness of results.

Our results highlight the signif‌icance of coercive, mimetic and normative pressures in

terms of Reports on the Observance of Standards and Codes (ROSC) reports, the extent of

accounting globalisation and education, respectively. However, in further analyses, we

found that coercive pressureis pronounced in developing countries. The mimetic pressure is

an inf‌luential factorfor all countries regardless of their status as developed or developing.

By using the institutional framework to explain XBRL adoption at a country level, this

study extends the generalisability and applicability of the institutional framework. From a

practical perspective, our f‌indings create more awareness of XBRL, a signif‌icant

contribution, given that lack of awareness has been identif‌ied as a major hindrance to the

use of XBRL (Cordery et al.,2011).Organisations such as XBRL International, the American

Institute of Certif‌ied Public Accountants (AICPA) and the Institute of Management

Determinants

of eXtensible

business

reporting

353