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Web-based financial reporting, social media and information asymmetry: the case of Saudi Arabia

Web-based financial reporting, social media and information asymmetry: the case of Saudi Arabia This paper aims to examine the effect of Web-based financial reporting and social media platforms on the proxies of information asymmetry in the Saudi Stock Exchange.Design/methodology/approachThe sample of this paper consists of 133 Saudi listed non-financial companies for the year 2019. Web-based disclosure level was measured using 25 items, and the social media platforms examined in this study are Facebook, Twitter and LinkedIn. The information asymmetry proxies are measured using the relative spread and the time-weighted average bid-ask spread.FindingsThe empirical results have shown that there is a negative and significant relation between Web-based financial reporting and the adoption of social media platforms and the proxies of information asymmetry. Indeed, the relative spread and the time-weighted average bid-ask spread decreased with increased Web-based reporting levels. Among three platforms (Facebook, Twitter and LinkedIn), the results show that only the use of Twitter as a channel for information disclosure has a negative and significant effect on information asymmetry proxies. Consequently, in the Saudi context, the authors demonstrate that the assumptions of the agency, stewardship and signaling theories are supported. Also, results reveal that the effect of information disclosure through websites and social media on reducing information asymmetry is stronger for large companies than small companies.Practical implicationsThe paper provides new insights into the role played by websites and social media platforms in the reduction of the information asymmetry in the stock market. Consequently, investors and regulatory authorities in the Saudi financial market must give great importance to online information disclosure and its implications for lowering information asymmetry. This empirical study informs regulators in Saudi Arabia to conduct the better practice of Web-based and social media financial reporting and to regulate the current practice of information disclosure. Besides, the obtained results have the potential to convince firms’ managers to improve online information disclosure to benefit from the reduction in information asymmetry.Originality/valueUnlike previous studies, this study investigates, simultaneously, the effect of Web-based and social media information disclosure on the proxies of information asymmetry in a developing economy. In addition, the hypotheses of this study are developed based on a set of theories (the agency, signaling and stewardship theories), to verify the applicability of these three theories in the Saudi context. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Reporting and Accounting Emerald Publishing

Web-based financial reporting, social media and information asymmetry: the case of Saudi Arabia

Journal of Financial Reporting and Accounting , Volume 20 (5): 27 – Dec 12, 2022

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References (69)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1985-2517
eISSN
1985-2517
DOI
10.1108/jfra-01-2021-0008
Publisher site
See Article on Publisher Site

Abstract

This paper aims to examine the effect of Web-based financial reporting and social media platforms on the proxies of information asymmetry in the Saudi Stock Exchange.Design/methodology/approachThe sample of this paper consists of 133 Saudi listed non-financial companies for the year 2019. Web-based disclosure level was measured using 25 items, and the social media platforms examined in this study are Facebook, Twitter and LinkedIn. The information asymmetry proxies are measured using the relative spread and the time-weighted average bid-ask spread.FindingsThe empirical results have shown that there is a negative and significant relation between Web-based financial reporting and the adoption of social media platforms and the proxies of information asymmetry. Indeed, the relative spread and the time-weighted average bid-ask spread decreased with increased Web-based reporting levels. Among three platforms (Facebook, Twitter and LinkedIn), the results show that only the use of Twitter as a channel for information disclosure has a negative and significant effect on information asymmetry proxies. Consequently, in the Saudi context, the authors demonstrate that the assumptions of the agency, stewardship and signaling theories are supported. Also, results reveal that the effect of information disclosure through websites and social media on reducing information asymmetry is stronger for large companies than small companies.Practical implicationsThe paper provides new insights into the role played by websites and social media platforms in the reduction of the information asymmetry in the stock market. Consequently, investors and regulatory authorities in the Saudi financial market must give great importance to online information disclosure and its implications for lowering information asymmetry. This empirical study informs regulators in Saudi Arabia to conduct the better practice of Web-based and social media financial reporting and to regulate the current practice of information disclosure. Besides, the obtained results have the potential to convince firms’ managers to improve online information disclosure to benefit from the reduction in information asymmetry.Originality/valueUnlike previous studies, this study investigates, simultaneously, the effect of Web-based and social media information disclosure on the proxies of information asymmetry in a developing economy. In addition, the hypotheses of this study are developed based on a set of theories (the agency, signaling and stewardship theories), to verify the applicability of these three theories in the Saudi context.

Journal

Journal of Financial Reporting and AccountingEmerald Publishing

Published: Dec 12, 2022

Keywords: Signaling theory; Social media platforms; Agency theory; Information asymmetry; Stewardship theory; Web-based disclosure; Saudi context

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