Proceedings

3. INDEPENDENT VARIABLES DISCUSSION AND HYPOTHESES
DEVELOPMENT
Voluntary disclosure in XBRL is the process of providing information to the financial
market and interested parties, although this information is not statutorily required by
the enforcing authorities. Thus, voluntary disclosure represents free choices of a
company’s management to provide information in a new format in addition to official
filings, such as 10-Q and 10-K filings. Different theories have been used in prior
studies to explain voluntary disclosure (e.g., Marston and Shrives 1996; Gray et al.
1995). In particular, agency theory may be relevant in the context of voluntary
disclosure in XBRL. Agency theory models the relationship between the principal and
the agent. In this context, the agent (manager) acts on behalf of the principal
(shareholder) (Jensen and Meckling 1976; Eisenhardt 1989). Managers with better
access to a firm’s specific situation can communicate reliable information in XBRL
format to external owners and investors in order to raise capital on the best available
terms (Gray et al. 1995; Bujaki and McConomy 2002). Additional financial and nonfinancial
disclosures may help voluntary filers in XBRL to attract new shareholders,
thus enabling companies to reduce information asymmetries and to enhance the value
of the firm. In an increasingly globalized world, the demand of accounting
information by capital market participants for valuation and investment decisions is
becoming more important (Broberg et al. 2009). It is assumed that as the worldwide
use of XBRL increases, companies will have more incentives to voluntarily provide
useful and timely disclosures.
Many studies have been carried out on the extent of voluntary disclosure and
empirical literature suggests several firm-specific variables that may explain voluntary
disclosures. In considering relevant firm-specific characteristics as proxies for the
degree of variation of voluntary disclosure in XBRL, this paper follows the approach
of Lang and Lundholm (1993). They found that firms that access the capital markets
are more likely to engage in voluntary disclosure. This paper expects the incentives to
be same for the dissemination of information in XBRL, and categorizes according to
Lang and Lundholm (1993) the independent variables into three categories (Lang and
Lundholm, 1993):
1. Structure-related variables (firm size, leverage ratio, and firm age)
2. Performance-related variables (return on assets, current ratio, and
innovativeness level)
3. Market-related variable (auditor type)
3.1 Structure-related variables
Size. Much evidence from past studies has stated a positive and significant
relationship between firm size and extent of disclosure of annual reports (Wallace et
al. 1994; Ahmed 1995; Meek et al. 1995; Zarzeski 1996). Also, Premuroso and
Bhattacharya (2008), as well as Callaghan and Nehmer (2009), state that the variable
firm size is significantly and positively associated with a firm’s decision to be a
voluntary filer of information in XBRL format. Larger firms may tend to disclose
more information for several reasons:
• Large firms have the resources for collecting, analyzing, and presenting
financial data in new formats like XBRL;
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