XBRL Adoption and Bank Loan Contracting: Early Evidence
Posted: 1 Dec 2014 Last revised: 30 Jul 2017
Date Written: May 4, 2013
Abstract
We examine how the adoption of the eXtensible Business Reporting Language (XBRL) for financial reporting impacts the pricing of bank loans. Using a sample of loans granted to U.S. borrowers from 2007–2013, we find that the adoption of XBRL is associated with a reduction in loan spreads. We further find that the reduction in loan spreads is greater for borrowers who have information that is inherently costlier to process. Results from a difference-in-differences specification along with other alternative research designs provide similar inferences. Subsequent to XBRL adoption, we further show that loan spreads are lower for firms who use more standardized XBRL tags and greater for those who use more extension elements. Overall, our results are consistent with the view that the XBRL mandate brings about an environment that enables lenders to gather and process information in a timelier manner and at a lower cost.
Keywords: eXtensible Business Reporting Language (XBRL), Information Technology, Information Processing Cost, Loan Contracting
JEL Classification: M41, K22
Suggested Citation: Suggested Citation