Proceedings

(1982) found no link between profitability measures and the extent of voluntary
disclosure. Based on the theoretical framework in section 2, it is more likely that
managers of a profitable firm will voluntarily disclose more information in XBRL to
the market to enhance the value of the firm. Therefore, the following hypothesis is
examined:
H4: The extent of voluntary disclosure in XBRL is positively related to the firm’s
profitability.
Liquidity. Liquidity can be defined as the ability of a company to fulfill its short-term
liabilities. Current ratio can be selected as a proxy for liquidity. It may be assumed
that the sounder the financial condition of the firm, the greater the incentives to
disclose more information in XBRL. Premuroso and Bhattacharya (2008) stated that
liquidity is positively associated with the voluntary XBRL filing decision. An
alternative viewpoint on this subject may be that firms with a weak financial position
have greater incentives to voluntarily disclose more information in order to mitigate
fears in the capital markets (Camfferman and Cooke 2002). Similar to the
performance-related variables like return on assets, the empirical evidence regarding
the relationship between liquidity and the extent of disclosure is not clear. Cooke
(1989) stated that the more liquid the financial condition of the firm, the greater the
incentive for it to disclose and signal its strength to the market. In contrast, Belkaoui
and Kahl (1978), as well as Malone et al. (1993), found no relationship between
liquidity and firm disclosure, while Wallace et al. (1994), as well as Camfferman and
Cooke (2002), found a significantly negative relationship. I believe that filers in the
VFP signal their strong financial condition and therefore disclose more information in
order to meet current obligations to short-term lenders or suppliers (Premuroso and
Bhattacharya 2008). In this study the following hypothesis is tested:
H5: The extent of voluntary disclosure in XBRL is positively related to the firm’s
liquidity.
Innovativeness. Certainly, there is a link between innovation and Research &
Development (R&D) (Staw 1976; Staw and Ross 1978; Fox and Staw 1979). R&D
can be seen as the organizational process most directly involved with innovations.
Firms have incentives to invest in R&D if post-innovation market competition allows
them to profit from their investments. The ratio of R&D expenditures to sales can be
used as a measure for input in innovation. Prior research examined the value
relevance of R&D Expenditures (Lev and Sougiannnis 1996; Chan et al. 2001). To the
best of my knowledge, only one study, done by Efendi et al. (2009), has examined the
effect of innovativeness of a firm on the likeliness of voluntary filing in XBRL
format. They state in their descriptive analysis that adopters are likely to be more
innovative firms as they spent on average 4.5% of sales amount for R&D compared to
only 2.9% the industry average. The innovativeness of a firm seems to be an
important issue for research in XBRL. Since XBRL technology is a new format in
business reporting, R&D intensive companies in science- and knowledge based
industries might have a great interest in innovative trends in business reporting. The
prospects of R&D intensive firms are tied to the success of new technologies (Chan et
al. 2001). Based on their business environment and the experiences of many research
projects, these firms might be willing to disclose more information. In comparison to
their long-term investments in R&D projects that are highly unpredictable, the
implementation of XBRL technology in business reporting is quite short and the
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