Article Metrics |
Article abstract view : 1028 times |
PDF full text: 283 times |
The Impact of Firm Performance on Annual Report Readability
Abstract
This paper attempts to find the impact of firm performance on annual report readability. This study consists of 15 listed firms on the Ghana Stock Exchange within the period 2008 to 2017. The study applies Gunning Fog Index to measure annual report readability and measures Firm Performance using Return on Assets (ROA) by applying the fixed and random effect method. Per the Hausman test, the random effect method was accepted; the result stated that firm performance positively relates to annual report readability. In addition, the study finds out that corporate governance exerted a negative influence on the readability of the annual report. Finally, the study adopts F-MOLS to test Robustness. Regulators can consider improving and writing plain disclosure laws to improve annual report readability.
Full Text:
PDFReferences
Ajina, A., Laouiti, M., & Msolli, B. (2016). Guiding through the Fog: Does annual report readability reveal earnings management? Research in International Business Finance, 38, 509-516. https://doi.org/10.1016/j.ribaf.2016.07.021
Asay, H. S., Libby, R., & Rennekamp, K. (2018). Firm performance, reporting goals, and language choices in narrative disclosures. Journal of Accounting Economics 65(2-3), 380-398. https://doi.org/10.1016/j.jacceco.2018.02.002
Aymen, A., Sourour, B. S., & Badreddine, M. (2018). The Effect of Annual Report Readability on Financial Analysts’ Behaviour. Journal of Economics Finance Accounting 5(1), 26-37. https://doi.org/10.17261/Pressacademia.2018.782
Baum, C. F. (2006). An introduction to modern econometrics using Stata: Stata press.
Bayerlein, L., & Davidson, P. (2011). The influence of connotation on readability and obfuscation in Australian chairman addresses. Managerial Auditing Journal, 27(2), 175-198. https://doi.org/10.1108/02686901211189853
Biddle, G. C., Hilary, G., & Verdi, R. S. (2009). How does financial reporting quality relate to investment efficiency? Journal of accounting economics 48(2-3), 112-131. https://doi.org/10.1002/csr.1517
Courtis, J. K. (1995). Readability of annual reports: Western versus Asian evidence. Accounting, Auditing & Accountability Journal https://doi.org/10.1108/09513579510086795
Courtis, J. K. (2004). Corporate report obfuscation: artefact or phenomenon? The British Accounting Review, 36(3), 291-312. https://doi.org/10.1016/j.bar.2004.03.005
Dempsey, S. J., Harrison, D. M., Luchtenberg, K. F., & Seiler, M. J. (2012). Financial opacity and firm performance: the readability of REIT annual reports. The Journal of Real Estate Finance Economics, 45(2), 450-470. https://doi.org/10.1007/s11146-010-9263-2
Dyer, T., Lang, M., & Stice-Lawrence, L. (2016). Do managers really guide through the fog? On the challenges in assessing the causes of voluntary disclosure. Journal of Accounting Economics 62(2-3), 270-276. https://doi.org/10.1016/j.jacceco.2016.08.001
ÈšarÈ, R. I. (2015). Estimating a corporate governance index for companies in Greece. Romanian Economic Journal 18(58), 97-116.
Ginesti, G., Drago, C., Macchioni, R., & Sannino, G. (2018). Female board participation and annual report readability in firms with boardroom connections. Gender in Management: An International Journal. https://doi.org/10.1108/GM-07-2017-0079
Ginesti, G., Sannino, G., & Drago, C. (2017). Board connections and management commentary readability: the role of information sharing in Italy. Corporate Governance: The international journal of business in society. https://doi.org/10.1108/CG-01-2016-0015
Gunning, R. (1952). Technique of clear writing. McGraw-Hill, New York.
Gyasi, W. K., & Owusu-Ansah, L. (2018). Social security and national insurance trust of Ghana annual reports: a readability analysis. Global Journal of Educational Research, 17(1), 15-21. https://doi.org/10.4314/gjedr.v17i1.3
Habib, A., Hasan, M. M., & Rahman, A. (2018). Business strategies and annual report readability. Accounting Finance https://doi.org/10.1111/acfi.12380
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the econometric society, 1251-1271. https://doi.org/10.2307/1913827
Ho, S. S., & Wong, K. S. (2004). Investment analysts’ usage and perceived usefulness of corporate annual reports. Corporate ownership control 1(3), 61-71. https://doi.org/10.22495/cocv1i3p6
Hooghiemstra, R., Kuang, Y. F., & Qin, B. (2017). Does obfuscating excessive CEO pay work? The influence of remuneration report readability on say-on-pay votes. Accounting Business Research 47(6), 695-729. https://doi.org/10.1080/00014788.2017.1300516
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53-74. https://doi.org/10.1016/S0304-4076(03)00092-7
Kim, D., & Starks, L. T. (2016). Gender diversity on corporate boards: Do women contribute unique skills? American Economic Review, 106(5), 267-271. https://doi.org/10.1257/aer.p20161032
Kumar, G. J. A. J. o. F. (2014). Determinants of readability of financial reports of US-listed Asian companies. Asian Journal of Finance Accounting, 6(2), 1. https://doi.org/10.5296/ajfa.v6i2.5695
Lang, M., & Stice-Lawrence, L. (2015). Textual analysis and international financial reporting: Large sample evidence. Journal of Accounting Economics, 60(2-3), 110-135. https://doi.org/10.1016/j.jacceco.2015.09.002
Lehavy, R., Li, F., & Merkley, K. (2011). The effect of annual report readability on analyst following and the properties of their earnings forecasts. The Accounting Review, 86(3), 1087-1115. https://doi.org/10.2308/accr.00000043
Levin, A., Lin, C.-F., & Chu, C.-S. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1-24. doi:https://doi.org/10.1016/S0304-4076(01)00098-7
Li, F. (2008). Annual report readability, current earnings, and earnings persistence. Journal of Accounting and Economics, 45(2-3), 221-247. https://doi.org/10.1016/j.jacceco.2008.02.003
Liao, L., Luo, L., & Tang, Q. (2015). Gender diversity, board independence, environmental committee and greenhouse gas disclosure. The British Accounting Review 47(4), 409-424. https://doi.org/10.1016/j.bar.2014.01.002
Luo, J.-h., Li, X., & Chen, H. (2018). Annual report readability and corporate agency costs. China Journal of accounting research, 11(3), 187-212. https://doi.org/10.1016/j.cjar.2018.04.001
Merkl-Davies, D. M., & Brennan, N. M. (2007). Discretionary disclosure strategies in corporate narratives: incremental information or impression management? Journal of accounting literature, 27, 116-196.
Risa Wahyuni, E., Febrianto, R., & Rahman, A. (2018). Firm Performance and Readability of the Annual Report.
Rjiba, H. (2015). Annual report readability and the cost of equity Capital Working Paper, IRG, Université Paris-Est.
Stanton, P., & Stanton, J. (2002). Corporate annual reports: research perspectives used. Accounting, Auditing Accountability Journal https://doi.org/10.1108/09513570210440568
Weygandt, J. J., Kimmel, P. D., Kieso, D., & Elias, R. Z. (2010). Accounting principles. Issues in Accounting Education, 25(1), 179-180. https://doi.org/10.2308/iace.2010.25.1.179
Wooldridge, J. M. (2002). Econometric analysis of cross section and panel data MIT press. Cambridge, MA, 108.
Copyright (c) 2021 INTERNATIONAL RESEARCH JOURNAL OF BUSINESS STUDIES
International Research Journal of Business Studies has been covered by the following services: | ||||||||||||||||||||||||