Research On The Effect Of Information Disclosure Driven By XBRL On Executive Compensation Performance Sensitivity

Since 1998,when Charles Hoffman,an American certified public accountant,firstly brought this view into public,the XBRL has been rapidly accepted and widely applied all over the world,and it also has been adopted as standard for financial reporting in many countries.And in 2009,China's Shanghai stock exchange and Shenzhen stock exchange launched the new platform of the XBRL standards.The adoption of XBRL financial report has been a hot topic in the field of accounting and financial information disclosure.The limitations of the traditional PDF format financial statements in terms of data sharing and timeliness have promoted the development of financial reports based on the XBRL.The greatest advantage of XBRL based financial reporting is that its tagged data processing can more accurately and timely communicate information about the company's operations to information users and improve the quality of accounting information.When information users obtain high-quality accounting information,they can have a positive effect on making correct decision-making.On the contrary,if the quality of the accounting information obtained by the users is low,it may have a negative impact on the decision-making behavior.The related research of XBRL adoption is a hot topic,mainly focusing on technical specifications,classification standards and application effects of XBRL adoption.However,currently few studies have been paid attention to the effect of XBRL-adopted financial reporting on corporate governance,especially on executive compensation management.Moreover,most of conclusions from these studies are inconsistent.The management of executive compensation is an important part of corporate governance,and XBRL information disclosure is an effective means to curb the moral risk of executives.However,the impact of XBRL information disclosure on the sensitivity of executive compensation and performance is rarely mentioned.Currently,the public is increasingly concerned about executive compensation and excessively high compensation has been arousing enormous controversy in society.Thus,it is also increasingly urgent to explore effective means to curb the unreasonable growth of compensation.Therefore,this study aims to conduct an in-depth empirical study to explore the effect of XBRL adoption on executive compensation in China to provide effective advice on the compensation system and XBRL's follow-up implementation.Firstly,this study conducts the investigation about absolute executive compensation levels and compensation performance sensitivity as a whole.Then,this study aims to comprehensively explore the effect of XBRL-adopted financial reporting on the sensitivity of executive compensation performance creatively from a multi-dimensional perspective.This perspective includes three dimensions of the XBRL-adopted time period,firm property and performance,plus the three-dimensional crossover.To certify these hypotheses,panel data from the financial reports of A-share-listed firms from 2007 to 2015 are adopted for descriptive and fixed-effect analysis.The analysis results indicate that the level of executive compensation generally rises after the adoption of XBRL in China.However,the adoption of XBRL enhances information disclosure,which in turn reduces the compensation performance sensitivity.The findings show that a law exists for describing the evolution of the effect of XBRL adoption over time,which indicates that the effect of XBRL adoption during an early period is greater than that during a later period.In the firm property dimension,the sensitivity of executive compensation performance of state-owned enterprises(SOEs)is higher than that of non-state-owned enterprises(non-SOEs)after XBRL adoption,and the sensitivity changing rate of SOEs is also greater than that of non-SOEs.In the firm performance dimension,the sensitivity of the executive compensation performance of well-governed firms is higher than that of poorly-governed firms after XBRL adoption,but the sensitivity changing rate of well-governed firms is smaller than that of poorly-governed firms.Furthermore,in the cross-dimension of time period and firm property,the effect of XBRL adoption on the sensitivity of executive compensation performance in non-SOEs shows a similar law to that in the time period dimension.However,no obvious law is shown in SOEs.In the cross-dimension of time period and firm performance,the effect of XBRL adoption on the sensitivity of executive compensation performance in well-governed firms also shows a similar law to that in the time period dimension.However,no obvious law is shown in poorly-governed firms.In the cross-dimension of firm property and firm performance,the sensitivity of executive compensation performance is closely correlated to firm performance,and correspondingly poorly-governed non-SOEs show a low sensitivity,which is even significantly lower than those in both overall poorly-governed firms and overall non-SOEs.The findings can help firms to identify their special properties,performances and XBRL-adopted time periods to make appropriate decisions to improve the performance of executive compensation management after XBRL adoption.