XBRL Adoption and Bank Loan Contracting: Early Evidence

Jeong‐Bon Kim · Jee‐Hae Lim · Jie Zhou

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Financial Reporting and XBRL Banking stability, regulation, efficiency Auditing, Earnings Management, Governance

Abstract

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 that use more standardized XBRL tags and greater for those that 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. JEL Classifications: M41; K22.

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2021Digital Corporate Reporting: Research Developments and Implications 2020Digital corporate reporting and value relevance: evidence from the US and Japan 2018XBRL Adoption and Systematic Information Acquisition via EDGAR 2021The roles of XBRL and processed XBRL in 10‐K readability 2019Does one size fit all? Evidence on XBRL adoption and 10‐K filing lag

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