Chapter

Accounting Information Systems for Decision Making

Volume 3 of the series Lecture Notes in Information Systems and Organisation pp 233-247

Date:

Interactive Data: Technology and Cost of Capital

  • S. Sarah ZhangAffiliated withKarlsruhe Institute of Technology, School of Economics and Business Engineering Email author 
  • , Ryan RiordanAffiliated withKarlsruhe Institute of Technology, School of Economics and Business Engineering
  • , Christof WeinhardtAffiliated withKarlsruhe Institute of Technology, School of Economics and Business Engineering

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Abstract

We examine the introduction of the voluntary filing program (VFP) by the Securities and Exchange Commission (SEC) for the introduction of XBRL (eXtensible Business Reporting Language), or Interactive Data as called in the US. XBRL is a machine-readable standardized format for financial reports. The VFP allowed firms to file annual and quarterly reports using XBRL. This program represents a quasi-natural experiment to isolate the effects of an improvement in the information environment of program participants. We study two documented effects of voluntary disclosure, reduced cost of capital and increased information intermediation. Our results show a decrease in the cost of capital, especially for financial and IT firms, and an increase in information intermediation. These effects support existing literature on the adoption of IT in firms and voluntary corporate disclosure and sheds light on the decision to be an early adopter of XBRL reporting technologies.

Keywords

Voluntary disclosure Information Cost of capital Financial reporting