The Impact of XBRL on the Level of Information Asymmetry in the Saudi Stock Market

Abstract

This research aims to examine whether XBRL adoption reduces the level of information asymmetry in the Saudi stock market. This research used the bid-ask spread as proxy before and after a period of adoption of XBRL to measure the level of information asymmetry. The data was analyzed using paired t-tests and multiple regression analysis. The methods have been used by 71 listed companies on the Saudi Stock Market (Tadawul). The study compares companies' data between two periods marked by the adoption of XBRL. The first period is before XBRL adoption, and it begins from April 2015 ending in January 2016. The second period is after the adoption of the XBRL, which lasts from April 2016 to January 2017. The results show that XBRL adoption has an insignificant impact on the level of information asymmetry, due to two main reasons. The first is the lack of skills required to apply the XBRL language in companies. The second reason is the weakness of the obvious efforts of the accounting institutions and organizations in Saudi Arabia. Our evidence could potentially assist the Capital Market Authority and other accounting authorities in Saudi Arabia to assess and increase their effort to introduce the benefits of XBRL and help the companies to improve the necessary skills for the application of XBRL.