Foreign investors’ tendencies and stock market performance in pre- and post-XBRL adoption: evidence from Jordan

Humeedat, Mohammad Mahmoud Article Foreign investors’ tendencies and stock market performance in preand post-XBRL adoption: evidence from Jordan Cogent Business & Management Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Humeedat, Mohammad Mahmoud (2024) : Foreign investors’ tendencies and stock market performance in preand post-XBRL adoption: evidence from Jordan, Cogent Business & Management, ISSN 2331-1975, Taylor & Francis, Abingdon, Vol. 11, Iss. 1, pp. 1-12, https://doi.org/10.1080/23311975.2024.2429790 This Version is available at: https://hdl.handle.net/10419/326693 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Cogent Business & Management ISSN: 2331-1975 (Online) Journal homepage: www.tandfonline.com/journals/oabm20 Foreign investors’ tendencies and stock market performance in preand post-XBRL adoption: evidence from Jordan Mohammad Mahmoud Humeedat To cite this article: Mohammad Mahmoud Humeedat (2024) Foreign investors’ tendencies and stock market performance in preand post-XBRL adoption: evidence from Jordan, Cogent Business & Management, 11:1, 2429790, DOI: 10.1080/23311975.2024.2429790 To link to this article: https://doi.org/10.1080/23311975.2024.2429790 © 2024 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group Published online: 21 Nov 2024. Submit your article to this journal Article views: 503 View related articles View Crossmark data Citing articles: 1 View citing articles Full Terms & Conditions of access and use can be found at https://www.tandfonline.com/action/journalInformation?journalCode=oabm20 Accounting, corporAte governAnce & Business ethics | reseArch Article Cogent Business & ManageMent 2024, VoL. 11, no. 1, 2429790 Foreign investors’ tendencies and stock market performance in preand post-XBRL adoption: evidence from Jordan Mohammad Mahmoud humeedat amman university College for Financial & administrative sciences, al-Balqa applied university, amman, Jordan ABSTRACT the adaptation of modern technologies to serve economic decision-makers is regarded as an important factor for capital market development. therefore, this study investigates foreign investors’ tendencies and stock market performance in preand post-eXtensible Business reporting language (XBrl) adoption. Foreign investors’ tendencies were determined by the monthly net foreign investores buying , whereas stock market performance was determined by the monthly market index. Data for 167 listed firms on the Amman stock exchange (Ase) were collected for this study during a 6-year period, from 2018 to 2023, including three years before and three years after XBrl adoption. the results of this study show a significant difference in stock market performance but no differences in net foreign investment in preand post-XBrl adoption. Multiple regression analysis revealed a strong positive relationship between XBrl adoption and stock market performance and a negative relationship with net foreign investment. 1. Introduction one of the most crucial factors contributing to the attractiveness of financial markets is the availability of information at the right time in a useful format. information enables decision-makers especially investors to make investment decisions more effectively, quickly, and easily. the ability to compare the information between listed companies in the same financial market with that provided by other financial markets is one of the most crucial features that should be available in these reports. information must also be prepared and presented in a way that makes it easy for everyone to read and understand. in line with the technical development taking place in all areas of life, it has become necessary to take advantage of this in the service of the economy and the capital market through the preparation and presentation of financial information electronically to different decision-makers. thus, most of the financial markets requested the listed firms to introduce their financial reports in accordance with iFrs and started applying XBrlas a global technique of viewing financial and non-financial information, which allows investors with various backgrounds to quickly and easily obtain and understand the information. the XBrl was created in response to the shortcomings of traditional reporting techniques (ilias et al., 2020). According to rezaei (2013), inconsistent accounting concepts and report formats may make it challenging to automate data extraction and analysis, and it is also challenging to compare the financial statements of two distinct companies side by side due to identical reporting items varying names. several studies have provided evidence that electronic systems such as XBrl adoption are advantageous and have favorable effects (Blankespoor, 2019; rahwani et al., 2019; vysochan et al., 2023). Among the expected benefits are attracting foreign investments to the financial market and supporting its efficiency. in this context, adopting an internationally recognized unified language for electronic disclosure, such as XBrl, will significantly improve the standard of disclosure in financial markets and consequently boost © 2024 the author(s). Published by informa uK Limited, trading as taylor & Francis group CONTACT Mohammad Mahmoud Humeedat [email protected].jo amman university College for Financial &administrativesciences, al-Balqa applied university, amman, Jordan. https://doi.org/10.1080/23311975.2024.2429790 this is an open access article distributed under the terms of the Creative Commons attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the terms on which this article has been published allow the posting of the accepted Manuscript in a repository by the author(s) or with their consent. ARTICLE HISTORY received 29 April 2024 revised 20 August 2024 Accepted 10 november 2024 KEYWORDS Foreign investors’ tendencies; stock market performance; eXtensible business reporting language; Amman stock exchange; Jordan SUBJECTS Business; Management and Accounting; economics; Finance 2 M. M. huMeeDAt transparency in these markets. Ase took the initiative in collaboration with the Jordan securities commission (Jsc) in 2020 to continue with the application of XBrl in the Jordanian financial market. this study aims to measure Ase tendencies in preand post-XBrl adoption by attracting foreign investment and supporting market performance. given the recent adoption of XBrl in Jordan, we note that the majority of studies have focused on the expected benefits of applying this language to the business environment, with few studies addressing the actual impact. As a result, this study will contribute to narrowing the gap between previous studies while also enriching them by providing realistic evidence of the impact XBrl adoption on foreign investment and market performance and presenting results and recommendations that will benefit the Jordanian business environment, specifically the authorities in charge of the financial market. 1.1. Research problem electronic preparation and disclose of financial information is considered one of the most important recent developments in the business environment because of the numerous advantages it provides to all parties involved. on the other hand, this progress may be plagued by numerous issues concerning the reliability of information delivered electronically and users’ trust in what it contains. According to li and nwaeze (2018), XBrl extensions negatively impact business information environments during the early stages of XBrl adoption and positively influence firms’ information environments during the later phase of XBrl implementation. guo and Yu (2022) conclude that retail investors prefer traditional methods to structured data issued by XBrl when making their decisions. in Jordan environment, Alkayed et al. (2023) show that XBrl adoption typically improves information transparency and efficiency in financial reporting, this study has certain limitations related to sample size and the fact that certain study population groups did not have direct knowledge of the topic of XBrl. Additionally, several earlier studies conducted in Jordan concentrated on the anticipated effects of implementing XBrl on numerous aspects of interest to both users and financial report preparers (Altarawneh, 2021; Qushtom, 2021; Abed, 2018). Jordan is considered a recently developed country that implemented the XBrl language in the financial market, and there have been few previous studies in the Jordanian environment that used quantitative measures to assess the impact of XBrl adoption on the performance of the financial market and its investors. therefore, this study came to measure the differences in the market index and foreign investment in Ase between preand post-adoption of XBrl. 2. XBRL an overview XBrl dates back to 1998, when charles hoffman, a certified public accountant, started the creation of an XMl-based language for company reporting (American institute of certified public Accountants, 1998). in 1999 the first copy of the eXtensible Financial reporting Markup language (XFrMl) was developed and named XBrl after making several technical modifications. XBrl is a “programming language designed to enable the exchange of corporate information” (romney & steinbart, 2018; pp. 503). cong et al. (2014) stated that XBrl “a corporate computer language that defines a technique to share financial information.” to raise awareness of automated disclosure and its importance among firms and other involved parties, the Ase published a brochure on electronic disclosure using XBrl in 2018. Ase and Jsc launched XBrl on December 20, 2020. Ase reveals that the automated disclosure system project is an important project that serves all related parties in the financial market, where this system represents a qualitative leap in the disclosure mechanism for presenting financial and non-financial firms’ information, and has led to the development of a method for obtaining information and disclosures in both Arabic and english. compared to alternative reporting formats, such as excel, pDF and XtMl, XBrl offers additional benefits for the development, preparation, interchange, analysis, and sharing of business information (Borgi & tawiah, 2022). 3. Literature review and hypothesizes development one of the emerging issues in information technology texts is the examination of users’ perceptions of technology. studies that assess users’ perceptions of technology frequently use subjective measures cogent Business & MAnAgeMent 3 because those users frequently require a specific understanding of technology before relying upon it (ghani, 2008). Janvrin and no (2012) conclude that users of financial reports have difficulty obtaining data stored on company web pages via the htMl or pDF versions because it requires considerable time-consuming activity, such as moving data from one file to another. in general, and especially since the corona crisis, reliance on modern electronic means has expanded in education, economy, and other areas of life, which has aided members of society to accept technology and develop their talents. Different studies have demonstrated that using XBrl reduces information asymmetry, improves analyst forecasting precision, reduces the cost of capital, and promotes company stock liquidity (liu et al., 2017; Felo et al., 2018; lestari et al., 2021). ghani et al. (2014) investigated Malaysian financial reporting preparers’ attitudes toward XBrl and discovered that the majority of preparers believe that XBrl is compatible and hence advantageous to companies for decision-making. however, several studies have shown that institutional investors are more responsive and benefit from new technological approaches to receive suitable information to make investment decisions. pan and Ji (2023) concluded that increased institutional investor participation is one of the determinants of success and promotes the adoption of XBrl technology by listed firms. XBrl enhances the quality of investment decisions and increases the accuracy, confidence, and calibration of financial information (Almilia et al., 2019; Almilia & Anas hartika, 2022). the adoption of XBrl offers not only easier and less expensive access to data, but also the ability to change the models virtually instantly as new information is released, providing a considerably more useful tool for investors, particularly small investors (palas & Baranes, 2019). using XBrl technology to understand financial information enhances beginner investors’ choice quality by affecting decision efficiency (scarlata etal., 2019). XBrl lowers the cost of information processing and improves capital market information transparency, which lowers investor expectations of potential crash risk (Zhang et al., 2019). given the significance of financial information for numerous internal and external stakeholders, the quality of financial reports is regarded as one of the most significant areas of investigation in accounting. As a result, numerous studies have been conducted to investigate the impact of using the XBrl language on the quality of financial reports. tawiah and Borgi (2022) investigate the effect of XBrl adoption on financial reporting quality at the country level, using data from 98 developed and developing countries between 2005 and 2018. the findings show that XBrl is correlated with higher financial reporting quality, with the relationship being greater in developing countries than in developed countries. Also, Ashoka et al. (2020) concluded that financial reporting, auditing, and the quality of financial information are all perceived to be impacted by the adoption of XBrl. on the other hand, Mustafa (2023) concluded that XBrl did not reduce earnings management or improve the quality of earnings reported in financial reports that were submitted to the saudi stock exchange. Furthermore, corporations are permitted to use XBrl to construct taxonomic extension. guo and Yu (2022) provide empirical evidence that retail investors do not utilize XBrl to the extent expected by the united states securities and exchange commission. According to the findings, primary reports in the htMl format are significantly more commonly used than structured data in raw XBrl. the Amman stock exchange was founded in March 1999 as a non-profit independent institution authorized to operate as a regulated market for trading securities in Jordan, it includes 167 listed companies, divided into four main sectors, banks, insurance, service, and industry. slehat (2018) examined the impact of technical, organizational, and environmental variables on XBrl adoption in Jordanian businesses, and concluded that listed companies in Jordan have the required facilities for XBrl implementation. Qushtom (2021) demonstrates a significant positive correlation between the use of the XBrl framework and the value of financial information for decision-making and planning. on the other hand, Bani-Khalid et al. (2021) revealed that to increase the uniformity of the informational content in annual reports, it is essential to comprehend how financial reports preparers and users view the obstacles to XBrl adoption in different commercial sectors. Altarawneh (2021) demonstrates that, even after mandatory XBrl deployment, knowledge of the language remains limited among financial reporting stakeholders, and that there is a gap between the projected and actual benefits of implementing such a technology. Al-Qatanani (2024) concludes that there is no significant value added to investors by e-disclosure using XBrl. Finally, Altarawneh etal. (2022) found an adverse correlation between information asymmetry and XBrl utilization, suggesting that XBrl adoption could reduce information asymmetry in the Jordanian stock market. 4 M. M. huMeeDAt h01: there are no statistically significant differences in net foreign investors’ tendencies and market performance between preand after the adoption of XBrl in Amman stock exchange. 3.1. Foreign investment and XBRL previous research findings contradict regarding the nature of the relationship between XBrl adoption and foreign investor tendencies. Arora and chauhan (2023) revealed that readable financial reports attract foreign investments and that readability differs according to the degree of information asymmetry. Wang and seng (2014) determine that there is a positive correlation between foreign institutional investor ownership and XBrl adoption. choi etal. (2015) demonstrates that the implementation of XBrl has an effect on foreign investors’ trading habits, and finds that small firms have a more noticeable and economically significant increase in the foreign investor turnover ratio than large. however, other studies indicate that foreign investors face greater informational disadvantages than domestic investors. this is due to the fact that domestic investors are more able to track company performance and have better access to information than foreign investors (choe et al., 2005). rjiba et al. (2021) demonstrated that complicated textual disclosure restricts investors’ ability to process and analyze financial reports, resulting in increased risk and consequently, higher equity capital costs. Also, lee etal. (2022) conclude that a weak relationship between XBrl quality and investor response in companies with large holdings from foreign investors. Based on the above explanation, we hypothesized that: h02: the adoption of XBrl did not increase the net foreign investments in Amman stock exchange. 3.2. Stock market performance and XBRL Financial market efficiency is determined by a variety of factors, one of the most significant of which is providing and presenting financial information to investors and related parties in an accessible and simple manner. Wanaputra et al. (2018) examine the impact of XBrl adoption on firm performance from 2008 to 2013, and conclude that XBrl adoption positively affects market performance and increases stock market efficiency (cong et al., 2014). When information is disclosed in the XBrl format, efficiency in the chinese capital market increases, and corporate stock price synchronicity levels decrease (ruan et al., 2021). on the other hand, empirical evidence was presented by sassi et al. (2021) to support the claim that the implementation of XBrl has a negative impact on financial market development, stringent regulations are required for XBrl to be adopted successfully, and that the system is required to guarantee that stakeholders are aware of the importance of the data provided by financial reports in XBrl format. cormier et al. (2022) analyzed the significance of voluntary disclosure using XBrl in financial markets and discovered that, after a certain level of XBrl extended disclosure, the effect on the share price is negative. Based on the above explanation, we hypothesized that: h03: the adoption of XBrl did not improve the performance of the Amman stock exchange. 4. Research methodology this study followed a quantitative methodology, which is the most widely used in the field of scientific research, this study tended to be more realist than positivist because adopting XBrl was expected to increase foreign investment and support market performance, and used a deductive method for developing hypotheses and conducting statistical testing. We relied on the monthly statistics published on the Ase website to compile the study’s quantitative data during the period extending from 2018 to 2023. A regression models are developed to determine the impact of XBrl adoption on foreign investment and financial market performance in Ase which contains 167 listed companies in the year 2023, the study relied on monthly statistics published on the Ase website. since the adoption of XBrl began at cogent Business & MAnAgeMent 5 the end of December 2020, the study period covered three years before (2018-2020) and three years after adoption (2021-2023), while controlling variables previously found to influence the foreign investment and financial market performance as follows: Model 1: FORINV XBRL LogTrad DD MV MV BV GDP it it it it it =+ + + − + −+αβ β β β β 0 1 2 3 4 5 ii t + ε (1) Whereas: FORINV it = foreign investments is measured by net foreign investors buying (total value of shares purchased less total value of shares sold) during the study period (Xu et al., 2023). XBRL it = A dummy variable that shows 0 for the time period prior to the adoption of XBrl and 1 for the period following it (tohang & lusiana, 2022; liu et al., 2014). control variables: LogTrad = natural logarithm of the trading volume in the Jordanian dinar. DD-MV = cash dividends distributed divided by the share’s market value. MV-BV = shares market value divided by the shares book value. GDP = real gross Domestic product Model 2: INDEX XBRL LogTrad DD MV MV BV GDP it it it it it i =+ + + − + −+αβββββ 0 1 2 3 4 5 tt + ε (2) Whereas: INDEX it = stock market performance is measured by the market index, which was represented by the monthly collective performance of all shares of companies listed on Amman stock exchange (osifo & Abusomwan, 2023). 5. Analytical results the following part shows the results and interpretations of statistical approaches used in data analysis. 5.1. Descriptive statistics table 1 presents descriptive statistics for net foreign investments, with an average mean of 6.420 million Jordanian dinars, as determined by the total value of shares purchased from the Ase by foreign investors less the total value of shares sold during the study period. the lowest value was -39.500 million in 2022, while the highest value was 460.900 million in 2018. Figure 1 illustrates the degree of variation in average foreign investment over the course of this study. it peaked in 2018 at 40.900 million, fell to 9.242 million in 2020, and then increased once again to reach −5.717 million by 2020. table 2 provides descriptive statistics for stock market performance as determined by the market index, where the index level is 2074.45 points on average. the lowest level was 1551.37 points in 2020, while the highest value was 2676.5 points in 2023. Figure 2 illustrates the level of variation in the average Ase index over the course of the study period. it reached 2058.67 points in 2018, fell to 1650.48 points in 2020, and peaked in 2023 at a level of 2488.54 points. table 3 provides descriptive statistics for independent and control variables during the study period. 5.2. Multicollinearity the correlation analysis for independent and control variables included in the study regression models is shown in table 4. consequently, this suggests that there is little correlation between the variables, ranging from 0.062 to 0.569. the fact that pearson’s correlation for every variable is less than 80% (gujarati et al., 2017) suggests that the study models do not have a linear correlation issue. 6 M. M. huMeeDAt Table 1. Descriptive statistics of foreign investments. Period symbol NYear Minimum Maximum Mean std. Dev. Pre-XBRL 0 12 2018 −7.300 460.900 40.900 132.6530 0 12 2019 −6.600 153.300 16.283 45.0035 0 12 2020 −27.100 1.100 −5.717 7.2825 Post-XBRL 1 12 2021 −28.800 0.040 −5.155 7.8104 1 12 2022 −39.500 11.600 −5.292 12.4017 1 12 2023 −13.706 13.200 −2.500 6.21741 total 72 2023-2018 −39.500 460.900 6.420 58.2159 Figure 1. Foreign investments. Table 2. Descriptive statistics of stock market performance. Period symbol n Year Minimum Maximum Mean std. Dev. Pre-XBRL 0 12 2018 1863.13 2233.26 2058.671 127.6321 0 12 2019 1795.21 1992.12 1857.424 65.25806 0 12 2020 1551.37 1867.9 1650.484 102.1418 Post-XBRL 1 12 2021 1726.82 2120.86 1977.258 159.6908 1 12 2022 2148.3 2607.1 2414.343 150.4502 1 12 2023 2406.8 2676.5 2488.542 98.27198 total 72 2023-2018 1551.37 2676.5 2074.45 319.7495 Figure 2. stock Market performance. Table 3. Descriptive statistics for independent and control variables during the study period (2018-2023). Variables NMinimum Maximum Mean std. Dev. XBRL 72 .00 1.00 .5000 .50351 Logtrad 72 4.50 5.77 5.1134 .19507 DD/MV 72 .81 6.75 4.2660 1.58709 MV-BV 72 .80 1.35 1.0982 .14463 gDP 72 6992.09 9662.08 8204.5640 742.83582 cogent Business & MAnAgeMent 7 5.3. Autocorrelation the Durbin–Watson test values are limited to (0) and (4), and if its value ranges between (1.5–2.5), this indicates that there is no autocorrelation problem (Kenton, 2021). table 5 shows that the value (Durbin–Watson) calculated for the hypotheses was greater than (1.5) and less than (2.5) at the 5% significance level, indicating that there is no autocorrelation problem and that the regression models are valid for testing. 6.Testing the hypotheses this part shows the results and interpretations of the analyze data for the study hypothesis. 6.1. Testing the first hypothesis table 6 presents the calculated mean and standard deviation of net foreign investments and market performance for the preand post-XBr adoption periods, in order to test the first hypothesis. the mean value of net foreign investments was higher prior to the adoption of XBrl than after adoption, with values of 17.1556 and –4.3156, respectively. Also, the mean value of market performance after the adoption of XBrl was higher than the mean value before the adoption, with values of 2293.381 points and 1855.526, respectively. to figure out the statistically significant aspect of the differences, a one-way analysis of variance (one-way AnovA) was used, and the results were shown in table 7. the F-value for net foreign investments is (2.500) with a P-value of 0.118, demonstrating that there are no significant differences in the net foreign investments between preand post-adoption of XBr. the F-value for the market performance is 63.434, with a P-value of 0.000, indicating that there are significant differences in the level of the market index between preand post-adoption of XBr, and differences were centered on the period following XBrl adoption, which had a higher mean and standard deviation. 6.2. Testing the second hypothesis table 8 shows the findings of regression analysis for model (1), which investigates the effect of XBrl adoption on net foreign investment in the Amman stock exchange. Table 4. Correlation matrix for the study models. Variables XBRL Logtrad DD/MV MV/BV gDP XBRL 1 Logtrad 0.222 1 DD/MV 0.140 0.181 1 MV/BV 0.182 0.360** 0.427** 1 gDP 0.569** 0.101 0.399** 0.062 1 **Correlation is significant at the 0.01 level. Table 5. Durbin–Watson test values. Model Hypothesis Durbin–Watson calculated 1 Ho.2 2.009 2 Ho.3 2.201 Table 6. Descriptive statistics of net foreign investments and market performance for period pre-and post-adoption of XBRL. Variable Period NMean std. Dev. std. error FoRinV Pre-XBRL adoption 36 17.1556 80.97254 13.49542 Post-XBRL adoption 36 −4.3156 −9.01982 1.50330 total 72 6.4200 58.21585 6.86080 inDeX Pre-XBRL adoption 36 1855.526 195.7082 32.6180 Post-XBRL adoption 36 2293.381 265.5219 44.2537 total 72 2074.454 319.7495 37.6828