Do board secretaries influence annual report readability?
ISSN: 0114-0582
Article publication date: 13 September 2022
Issue publication date: 9 January 2023
Abstract
Purpose
The purpose of this study is to investigate the impact of board secretaries’ characteristics on annual report readability using an original method that evaluates the readability of Chinese characters.
Design/methodology/approach
The authors manually collect board secretaries’ characteristics from the China Securities Market and Accounting Research database and obtain annual reports from the China Information website. Ordinary least square regression is applied to evaluate the impact, and then robustness tests and additional regression analyses are conducted.
Findings
Board secretaries’ legal-professional expertise, international expertise and role duality improve annual report readability. However, their political connections are negatively associated with it. The effect of expertise (role duality) is more pronounced for firms with lower ex ante litigation risk (board secretaries with equity holdings). Furthermore, higher readability increases the compensation of board secretaries, whereas lower readability increases their turnover. Finally, annual report readability is positively related to firm performance.
Research limitations/implications
The authors only investigate listed firms in China from 2007 to 2017 because of the difficulties of obtaining data and text mining.
Practical implications
The authors provide managerial insights for regulators aiming to establish an effective governance mechanism with Chinese characteristics. First, certain requirements for board secretaries’ expertise can improve annual report readability. Further, firms can consider appointing board members or senior executives as board secretaries to enhance disclosure quality.
Originality/value
To the best of the authors’ knowledge, this study is the first to verify the effect of board secretaries’ characteristics on disclosure quality, especially annual report readability. Moreover, this study proposes a novel measure of annual report readability for Chinese texts.
Keywords
Acknowledgements
The authors gratefully acknowledge that this study is sponsored by the National Natural Science Foundation of China (Approval Number: 72002025) and the Foundation of China Association for Science and Technology (Approval Number: DXB-ZKQN-2017-022). They would also like to express their sincere appreciation to the editor and anonymous reviewers for their constructive comments.
Citation
Sun, W., Zhu, J. and Wang, X. (2023), "Do board secretaries influence annual report readability?", Pacific Accounting Review, Vol. 35 No. 1, pp. 126-160. https://doi.org/10.1108/PAR-01-2022-0014
Publisher
:Emerald Publishing Limited
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