IDEAS home Printed from https://ideas.repec.org/a/taf/raaexx/v32y2025i3p527-550.html
   My bibliography  Save this article

XBRL extensions and cost of equity capital in Chinese firms: a natural experiment

Author

Listed:
  • Zhili Tian
  • Songsheng Chen
  • Jun Guo
  • Sungsoo Kim

Abstract

This study investigates whether XBRL (eXtensible Business Reporting Language) extensions affect cost of equity capital in Chinese firms during the historical sample period of 2015–2016. We find that the additional information in XBRL extensions is positively associated with cost of equity capital in Chinese firms. These findings suggest that the excess information in XBRL extensions reduces the reliability and comparability of financial reporting, leading to an increase in information processing cost and exacerbating the quality of information environment in Chinese capital market. We also find that the positive association between XBRL extensions and cost of capital is stronger in the firms with higher information asymmetry of lower institutional ownership and lower analyst coverage. Furthermore, XBRL extensions associated with specific financial statement items play a significant role in raising cost of equity capital. Our findings indicate that the redundancy of information in XBRL extensions complicates information processing for financial statement users, thus adding value to the XBRL standard makers.

Suggested Citation

  • Zhili Tian & Songsheng Chen & Jun Guo & Sungsoo Kim, 2025. "XBRL extensions and cost of equity capital in Chinese firms: a natural experiment," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 32(3), pages 527-550, May.
  • Handle: RePEc:taf:raaexx:v:32:y:2025:i:3:p:527-550
    DOI: 10.1080/16081625.2024.2443839
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/16081625.2024.2443839
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/16081625.2024.2443839?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:raaexx:v:32:y:2025:i:3:p:527-550. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/raae20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.