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The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/1743-9132.htm XBRL-based financial reporting The role of agency costs in the voluntary adoption of XBRL-based financial reporting Mehdi Khedmati Department of Accounting, Monash University, Melbourne, Australia Farshid Navissi Department of Accounting, Massey University, Wellington, Neto Zealand, and Mohammed Aminu Sualihu and Zakiya Tofik-Abu Department of Accounting, Monash University, Melbourne, Australia Hd 1619 Revised 16 juny 219 1 MS 15 y 30 Abstract voluntary adoption of the exter is to whether and how firms agency costs played a role in the e Business Reporting Language (XBRI.) under the SEC" voluntary filing program (VEP) that encouraged the voluntary adoption of the XERL Design/methodology/approach - This study employs a logistics regression and a sample of 140 firms that voluntarily participated in the VFP during its entire existence in the United States, and 140 matched pait is not adoption of XERLL ly adopt the XBRL to investigate the role of agency costs in the voluntary Findings - We find evidence consistent with the conjecture that a firm's low magnitude of agency costs pilys a significant motivating role in the voluntary adoption of XBRL based financial reporting Our results continue to hold after using an alternative measure of agency costs and conducting two-stage least squares regressions, Supplementing these results, the study also shows that the level of agency costs of voluntary XERI adopters remains statistically unchanged after the adoption while the level of agency onists as d with the firms that did not participate in SEC: VFP significantly decline after the adoption during the XBRL mandate Practical implications - The findings of this study suggest that based on a firm's level of agency regulators and policymakers, especially those in countries that are yet to mandate XBRL reporting, cam, in advance, identify firms that are more likely to comply with their new financial reporting initiatives. Originality/value This paper provides first evidence on the role of a od agency costs in the voluntary adoption of XERL using data from the United States Keywords Agency costs. Information asymmetry Voluntary adoption, XURL. Paper type Research paper What we need is something that will give individuals faster access to better information that they can easily use and understand analyze and compare the data with the same information from other companies. We want to make the numbers derived from financial statements vastly more accurate and want to allow companies to communicate with investors on a constant basis. Securities and Exchange Commission (SEC] Chairman, COX, 2006) 1. Introduction eXtensible Business Reporting Language (XBRL) is an information technology (IT) data standard that provides an identifying tag for financial facts, such as total revenue, to create a straightforward way to identify and compare business performance of one company to another (Hoitash et al. 2006; Liu et al, 2017). The technology has been championed as a way to improve the efficiency, timeliness and faithful representation of financial data, and the ease med with which data can be acquired and analyzed (Garner et al., 2013). Accordingly, voluntary adoptist of XBRL has begun to grow worldwide for both publicly and privately owned firms DOM IJMF (Pinsker and Felden, 2016). Prior research has, therefore, examined the motivations for and determinants of XBRL adoption (see, eg, Bhattacharya and Premuurso, 2008, Efendi et al, 2011; Kaya, 2014). However, the propensity of firms with agency costs to voluntarily adopt XBRL-based reporting, to the best of knowledge, has not been examined. This study fills the literature gap by examining whether firms with agency costs voluntarily adopted XBRL reporting format under the voluntary filing program (VFP) in the United States [1] Agency costs, as suggested by agency theory, arise when the interests of managers are not aligned with those of the owners and can take the form of preference for on the job perks, shirking and making self-interested and entrenched decisions that reduce shareholder wealth Jensen and Meckling, 1976: Ang et al., 2000). The primary reason for agency costs in a firm is information inequity between insiders and outsiders Jensen and Meckling, 1976). Francis et al. (2008) and others (see, eg. Grossman and Hart, 1980), Milgrom, 1981; Verrecchia, 1983) argue that higher information asymmetry between the firm and the market creates a demand by the market players for disclosure. The XBRL-based reporting improves disclosure as it helps users to get access to firms financial data in real time with automatic updates. Efendi et al (2016) note that XBRL provides users with the opportunity to instantly search, compare financial information of firms, industry sectors, topics and issues in a timely manner (Efendi et al, 2016 Pinsker and Felden, 2016; Liu et al. 2017). If so, then firms with higher information asymmetry (higher agency costs), compared to those with lower agency costs, are less likely to voluntarily adopt XERI. reporting format because such a reporting format can expose their wrongdoing On the other hand, it can be argued that when there is lower information asymmetry between firms and investors, managers may have an incentive to disclose more information to signal their superior information environment and expect the market to positively respond to