The Diffusion of Innovation in Corporate Digital Reporting in Saudi Arabia: Practices and Perceptions

Abstract

The purpose of this study is to investigate corporate digital reporting (thereafter, CDR) in Saudi Arabia. It further seeks to explore the perceptions of different stakeholders in relation to the diffusion of eXtensible Business Reporting Language (thereafter, XBRL). In particular, the study examines the extent to which digital reporting is diffused and used among the non-financial companies listed on the Saudi Stock Exchange. Therefore, it adopts two theories—diffusion of innovations theory (thereafter, DIT) and stakeholder theory—to understand the perspectives of key stakeholders. These theories are linked in the sense that DIT requires stakeholder engagement to ensure diffusion. With this in mind, it is vital to ascertain the level of stakeholder engagement if the diffusion project is to succeed. This research adopts an interpretive mixed methods approach, making use of both qualitative and quantitative techniques, namely, a disclosure index and a questionnaire survey, to investigate the diffusion of digital reporting (first and second generation) among the non-financial companies listed is Saudi Arabia. Furthermore, stakeholder perceptions of digital reporting in Saudi Arabia will also be ascertained.

This study found that 63 (53.9%) companies in 2018, and 62 (49.6%) companies in 2019 had accessible websites and adopting XBRL. On the other hand, only four (3.4%) companies in 2018 and five companies in 2019 (4.0%) has adopted XBRL format without accessible websites, while 25 (21.4%) companies in 2018 and 26 (20.8%) companies in 2019 had not yet adopted XBRL format with accessible websites including financial information in their own websites vis the internet. Additionally, this study found that although most of the participants were very familiar with the PDF format, they were less familiar with HTML-based financial reporting, with some expressing a little familiarity with XBRL. Furthermore, most of the participants were familiar with the PDF format as the main CDR format, while XBRL obtained the lowest familiarity among the participants, as it is still in the early stage of adoption. The results indicate that the majority of participants were broadly satisfied with the potential benefits of both CDR and XBRL. Regarding the diffusion of XBRL, this study found limited and insignificant differences among the key stakeholders. In the same context, most company participants agreed that the department responsible for preparing financial reporting information in XBRL is the financial reporting team, while auditor participants were mostly in agreement that the external auditor is responsible for preparing the financial reporting information in XBRL format.

The current study found a disparity of opinions among key stakeholders regarding stakeholder influence on the diffusion of XBRL. This study spotlights the challenges associated with XBRL diffusion and identifies many significant differences between the key stakeholders. In terms of the steps needed to improve XBRL diffusion in Saudi-listed companies, the results found slight differences of opinion among the key stakeholders. Overall, this study concludes that CDR practices in the Saudi market are still very limited, particularly the diffusion of CDR as XBRL, compared to those found in developed capital markets. In addition, the results suggest that listed Saudi companies should use CDR as the main channel to communicate with key stakeholders and regulators and prepare their financial and non-financial information via the XBRL format.