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This study aims to examine the relationship between the corporate social responsibility (CSR) performance and the readability of annual report. The shareholder theory suggests that CSR firms will provide more transparent disclosures because this reflects a socially and environmentally responsible behavior and a firm’s commitment to high ethical standards. In the same time, the agency theory offers an opposite view. It predicts that opportunistic managers use CSR as an entrenchment strategy and hide their maneuvers through complex textual financial disclosures.

Based on a sample of 100 listed firms on the French CACAll-shares index over the period from 2013 to 2016, the authors use a panel regression analysis and run other estimation methods (IV-2SLS) and simultaneous equation model to address the endogeneity issues. They assess the readability of annual reports using the Gunning-Fog Index and the Flesch Index derived from the computational linguistics literature.

The results show a significant positive relationship between CSR performance and the readability of annual report. Firms engaging in CSR practices are more likely to provide transparent disclosures with higher readability because this reflects a socially responsible behavior and a firm’s commitment to high ethical standards. This result supports the stakeholder theory and the corporate reputational view. The finding is also robust to alternative readability measurements and to endogeneity bias.

This study helps all market participants to more comprehensively evaluate the CSR performance disclosed on annual report. It encourages managers to consider CSR as a means to prevent the opacity risk through improved information quality. It also drives French authorities to better regulate the narrative disclosure of CSR firms and change the way companies design their reporting practices. Moreover, it encourages CSR rating agencies to become the dominant definition of CSR evaluation by granting more importance to the quality of disclosed information.

This study extends previous research on the potential impact of CSR on information quality measured by annual report readability in the French context. Unlike prior studies on the impact of CSR on information quality, that focus exclusively on earnings management and adopt qualitative approaches to assess the SCR score, the authors use simultaneously the Gunning–Fog Index and the Flesch Index to assess the information quality and extract the CSR score from the CSRHub database of companies’ social, environmental and governance performance.

The purpose of this study is to examine the influence of the readability of annual reports on firms’ ability to obtain trade credit from suppliers. Particularly, the authors conjecture that annual report readability helps firms obtain more trade credit from suppliers.

The authors use the Gunning Fog Index as the primary measure of annual report readability and the ratio of accounts payable to the book value of total assets as the measure of trade credit.

Results from the study of 4,754 firms during the 2004–2016 period indicate that suppliers extend more trade credit to firms with more readable financial reports. The authors’ results are robust to alternative measures of trade credit and annual report readability. The authors’ results remain robust when we control for firm fixed effects and potential endogeneity problems using the instrumental variable approach. A further test shows that the level of trade credit is higher for firms in business service industries, and that this relation is weakened when firms disclose less readable 10-K filings.

The authors’ findings provide new insight into the role of financial report readability in firms’ ability to obtain trade financing from suppliers. The authors’ results are also in line with the SEC’s encouragement that firms use plain English and easy language in financial reporting.

The purpose of this study is to investigate the influence of IFRS convergence on annual report readability in an emerging market context, with an emphasis on the contents of management discussion and analysis (MD&A), notes to the accounts (Notes) and the whole annual report.

The study performs firm-fixed effect regression on a sample of 143 Indian listed companies over a period spanning from 2012 to 2021 to examine the influence of IFRS convergence on readability. This assessment primarily focuses on broader spectrums of readability dimensions, namely annual report length and complexity, wherein complexity is measured using the Gunning Fog, Flesch Reading ease and Flesch-Kincaid grade index.

As Indian firms shift to IFRS reporting, the findings suggest that annual reports have become significantly lengthier and more complex, causing deterioration in readability. The Notes section, in particular, exhibits the most significant increase in length and complexity, followed by the entire annual report and MD&A section. Furthermore, the findings also indicate that the complexity of the Notes section is instrumental in the observed complexity growth of the whole annual report in the post-IFRS period.

The current study employs readability indices rather than directly taking into consideration the opinions of actual users of annual reports to determine readability. As a result, the study does not provide direct evidence on how information in annual reports affects users' readability.

The findings provide insightful information to managers and policymakers about the difficulties stakeholders may encounter while reading IFRS-based annual reports, which ultimately impact their investment decisions. Thus, there is an important managerial implication from this, depending upon the severity of complexity corporations participate in while complying with IFRS in the post-IFRS period.

Analyzing the influence of exogenous information shock, such as IFRS convergence, on readability is critical, particularly for emerging markets like India, where a lack of financial literacy and weaker enforcement already have detrimental effects on the capital market. In light of this, the current study provides a comprehensive examination of the impact of IFRS convergence on annual report readability and contributes to the growing IFRS literature in the less explored emerging market context.

In this study, various acts including regulations of public financial management, fiscal responsibility, and state budget in the selected six countries were subjected to different readability tests, and an international comparison was made. The fiscal responsibility act of six countries – Turkey, the UK, India, Australia, Canada, and Pakistan – were included in the study and analyzed. Each country was analyzed under its official language. Since English is an official language of all of the countries except for Turkey, the authors have evaluated the fiscal responsibility acts of these countries using the following readability tests: Flesch Reading Ease, Flesch-Kincaid, Gunning-Fog, and Dale-Chall. Additionally, Public Financial Management and Control Law No. 5018 approved in Turkey was analyzed by the Ateşman Readability Test which was uniquely designed for Turkish grammar rules. The acts discussed in the study were analyzed not only as a whole but also in parts and subsections. According to the results of the study, the levels of readability of the existing laws in most of the selected countries are very difficult to understand for a university graduate. However, when the readability level of the British Budget Responsibility and National Audit Act tested as parts and subsections and a whole, it was rated at a level a university student could understand. This study analyses the readability and intelligibility of acts related to fiscal responsibility and the state budget in six selected countries, adopting Anglo-Saxon public administration model and making an inter-country evaluation. Since it is important that citizens have enough information about legislation for a citizen-oriented understanding, a legislation system that is understood by the larger part of the society is essential.

This study aimed at investigating the readability of sustainability reports in Indonesia. The Indonesian government, through the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan [OJK]), has issued regulation POJK 51/2017 concerning the implementation of sustainable finance, which requires public companies to prepare sustainability reports—either stand-alone reports or parts of annual reports. Until 2017, only 30% of the top public companies in terms of market capitalisation issued the required report. Companies' decisions to provide the report stem from the greater visibility and access to resources that flow from additional narratives. However, the usefulness of such a report can be questioned.

We used several linguistic techniques (Flesch Reading Ease [FRE], Flesch–Kincaid, and Gunning Fog measures) to evaluate the readability of sustainability reports. The analysis was performed using a software application called “Readability Studio 2015.”

We found the reports to have a low level of readability. This means that the information provided in the disclosures are very difficult to decipher and understand by the targeted users. Considering the similar levels of report readability in companies across industries, we observe a pattern of isomorphism in the way companies have implemented the same format and language construct in disclosing their sustainability information. They might apply the myth that complex language attracts investors or impresses others.

The techniques to measure readability that we use might not capture the whole dimensions of readability and understandability, especially in the non-English language.

The results from this study can be used as evaluation tools for companies and regulators in preparing more intelligible and readable sustainability reports, as mandated by POJK 51/2017.

Sustainability reports act as a medium of accountability for a company's sustainable production and operations. Their usefulness for investors and other users often depends on the readability of the information.

The readability of sustainability reports in the context of Indonesia as an emerging market has not been comprehensively investigated in previous research. This study is among the first of its kind to support the quality enhancement of the reports.

This study aims to investigate the readability of financial risk disclosure divulged by listed banks of the first five European countries according to gross domestic product.

This study adopts the management obfuscation hypotheses and tests data gathered for a sample of 790 observations from listed banks in Europe covering the 2007–2018 period. This study uses a readability index (Gunning’s fog index) as the dependent variable for measuring the readability of banks’ mandatory financial risk disclosures. Moreover, it relies on a completeness index, discretionary accruals and several control variables for identifying the determinants of risk disclosure readability using ordinary least square regression for testing the hypotheses.

The findings show the existence of a positive relation\nship between readability and completeness of risk disclosure. In contrast, a negative relationship exists between readability and banks’ discretionary accruals.

This study expands the stream of accounting literature analyzing the lexical characteristics of narrative risk disclosure, and, by focusing on the financial risk disclosure of banks, it extends the readability-related debate, which has primarily concentrated on other types of disclosure to date. This study is relevant to regulators and policymakers for fostering reflections as actions for improving the financial risk disclosures readability. This study is also of potential interest for investors to better delve into the questions surrounding risk disclosure.

The purpose of this paper is to analyze the content of mission statements of India’s Super 50 companies, selected from Forbes India magazine, on multiple aspects such as components, stakeholders’ inclusion, content readability and strategic orientation.

A total sample of 29 companies was chosen for the study, whose mission statement details were available on their official websites. These firms’ mission statement was rated on the basis of nine selected components of what constitutes a “good mission statement.” Further, industry-level analysis was also carried out to measure significant differences between manufacturing and service industries. Data were analyzed using frequency analysis, average and t-statistics. Gunning Fog index was also calculated to measure content readability.

The results show that Indian firms largely focus on their customers as major stakeholders while defining their mission and emphasize upon values and philosophy, products or services offered, and integration of technology in production or processes. There is no statistically significant difference identified between the average mean value of components for sample manufacturing and service firms.

The study is cross-sectional in nature; however, a few firms redesign their mission according to need; therefore, a detailed longitudinal study of a few firms could open up new paradigms. The findings are based on sample firms selected from Forbes India, so generalization needs to be done with complete caution.

The study looks ahead of the most popular of David’s (1989) nine crucial components of mission statements, taking into account major shifts in the business environment. It also attempts to fill a contextual research gap by analyzing the mission statements of top Indian firms. Three crucial elements – “strategic decision,” “stakeholder concerns” and “critical success factors” – have been identified for Indian firms that define their mission statement.

This study aims to examine a firm’s disclosure properties subsequent to receiving a going-concern opinion.

A difference-in-difference research design was used to control for endogeneity issues. Annual report readability is used as a proxy for firm disclosure.

The results indicate a negative and significant association between issuance of a going-concern report to a firm and the firm’s readability index in the subsequent year. In other words, after receiving a going-concern opinion, a firm’s annual report exhibits increased readability. The results, when broken into subsamples of surviving and failing firms, are concentrated in the surviving firms.

Prior research has shown that firms change their disclosure properties due to endogenous choices motivated by incentive or exogenous shocks. The results of this study, however, suggest that firms that receive going-concern opinions are incentivized to be more forthcoming in disclosing their financial information.

To the authors’ knowledge, this study is the first to investigate how firms’ general disclosures change subsequent to receiving a going-concern opinion.

This paper aims to examine the relationship between the readability of annual reports and corporate performance in Chinese listed firms.

This research examined the annual report readability factors of Chinese listed companies by using a textual analysis method using Python to extract the text from the annual reports, convert it into numerical form to facilitate statistical analysis and then merge the results with data from the Chinese stock market to explain the impact on corporate performance and predict future earnings in the Chinese financial markets from 2008 to 2021.

Study findings indicate that firms with better financial reporting readability are more profitable, incur lower agency costs and have low earnings in the Chinese stock markets when readability is low (i.e. more complexity and length of annual reports). It was also found that when a listed company has a good performance, it prefers to use a short space to explain its operating and financial status. More generally, the means of the report length are short, and accounting terms are used less frequently; in the case of a poor company, the annual report is particularly long and accounting terms are more frequently used. In the context of the COVID-19 crisis, this study served as a proxy measure of returns prior to the announcement of the COVID-19 pandemic. In addition, an instrumental variable approach is used, which helps results to remain robust and control for fixed effects and potential endogeneity problems.

Although this study’s results cannot be generalised globally because of their limited scope, they can still be generalised across non-English speaking countries. Thus, future cross-country research is encouraged to examine the textual analysis of financial reports across those countries.

This study conveys two messages to investors and policymakers within the Chinese market. First, investors ought to pay greater attention to the nonfinancial information contained in annual reports to improve the accuracy of their predictions regarding future firm performance. Second, Chinese policymakers are encouraged to instate a policy for the use of plain English in annual reports to make them more readable by international investors.

This study contributes to the paucity of research that examines English-written annual reports in non-English speaking countries by examining the readability of annual reports in the Chinese market.

The purpose of this study is to evaluate whether the amendments to International Accounting Standard (IAS) 39 and the introduction of International Financial Reporting Standards (IFRS) 9 enhanced the readability, and thus the quality and usefulness of risk disclosure information.

Readability analyses are performed on companies listed on the Johannesburg Stock Exchange (JSE) from 2005 to 2021. The sample period includes the period when companies disclosed information according to IAS 39 (2005–2017) and IFRS 9 (2018–2021).

The results of the analyses show risk disclosures for JSE-listed companies to be complex and difficult to understand. Furthermore, risk disclosures have become longer and less readable with the introduction of amendments to IAS 39 and the introduction of IFRS 9.

This study uses readability measures as a proxy for the complexity and usefulness of risk disclosures. The amount of utility a user of financial statements derives could be dependent on other factors such as the quality of disclosure, individual user background and perceptions.

The results have valuable implications for the various stakeholders that make use of the information contained in financial statements. Stakeholders such as regulators and standard setters should carefully assess how accounting standards change to ensure that one of the key objectives of the IASB, namely, to provide information that is relevant, reliable and understandable, is met.

The results of this study contribute to the discourse on the usefulness of companies’ risk disclosures. Though, to the best of the authors’ knowledge, this is the first study to compare the readability of risk disclosures from an emerging market perspective, the results can be applied to other countries using IFRS to assess the readability of risk disclosures.