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This paper aims to examine the relation between the cost of debt and the adoption of eXtensible Business Reporting Language (XBRL).
The financial data are obtained from the Compustat database. Regression analysis is used to examine the research hypotheses.
The authors find that both voluntary and mandatory adoption of XBRL lead to a lower cost of debt for firms, with weak evidence that this reduction is greater for the former than the latter.
The findings support the policy of the USA Securities and Exchange Commission (SEC), and thus this paper recommends that adoption of XBRL should be mandatory for all public firms.
The findings encourage top managers to develop their firms’ XBRL systems.
The results support the SEC’s policy of mandatory XBRL adoption, as it can lead to greater financial reporting transparency and mitigate information asymmetry between management and bondholders.
We examine explicitly priced financial distress risk in post-1990 equity markets. We add a financial distress risk factor to Fama and French's (1993) three-factor model…
We examine explicitly priced financial distress risk in post-1990 equity markets. We add a financial distress risk factor to Fama and French's (1993) three-factor model, based on Griffin and Lemmon's (2002) findings that financial distress is not fully captured by the book-to-market factor. We test three-factor and four-factor capital asset pricing models using both annual buy-and-hold analysis and monthly time series analysis across portfolios adjusted for common book-to-market, size, and financial distress factors. We find empirical support for an Ohlson (1980) O-score-based financial distress risk four-factor asset pricing model in the U.S. and Japanese markets.
The current volume in the Research in Finance series features an international set of contributors. The overall theme of the volume is a timely topic capturing one of the leading issues of the year: coping with “systemic” risk.