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Book part
Publication date: 10 December 2018

Gaétan Breton

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A Postmodern Accounting Theory
Type: Book
ISBN: 978-1-78769-794-2

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Book part
Publication date: 15 September 2016

Ali Bavik

A range of organizational culture scales have been developed and applied in various industries. However, the measurement of organizational culture is noticeably different…

Abstract

A range of organizational culture scales have been developed and applied in various industries. However, the measurement of organizational culture is noticeably different according to industry. Measuring organizational culture, specifically as it relates to the hospitality industry, is also a research area that has remained relatively unexplored. The purpose of this chapter is to discuss some essential problems and gaps existing in the previous studies. This chapter also presents a new scale entitled the “hospitality industry organization culture scale” that applies specifically to the hospitality context, and contributes to our understanding of organizational culture within this context. A multidisciplinary and mixed-method research approaches were followed in order to develop a new organizational culture scale for the hospitality industry. The findings suggest that the hospitality industry has unique cultural characteristics that are distinguished from similar industries.

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Tourism and Hospitality Management
Type: Book
ISBN: 978-1-78635-714-4

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Article
Publication date: 18 June 2021

Gatot Soepriyanto, Sienny Tjokroaminoto and Arfian Erma Zudana

This study aims to examine the association between annual report readability and accounting irregularities in Indonesia. Using 967 firm-year observations over the…

Abstract

Purpose

This study aims to examine the association between annual report readability and accounting irregularities in Indonesia. Using 967 firm-year observations over the 2014–2017 period, this paper unable to find evidence that annual report readability is associated with accounting irregularities. The results are robust after using alternate measurements of accounting irregularities proxies and readability indexes. This paper also finds that the corporate governance mechanism and foreign shareholder structure did not moderate the association between annual report readability and accounting irregularities.

Design/methodology/approach

The study uses an archival method with cross-sectional regression of 967 firm-year observations over the 2014–2017 period to investigate an association between annual report readability and accounting irregularities in an emerging market setting. To check the robustness of the results, this paper conducts a battery of robustness tests.

Findings

This paper finds evidence that annual report readability is not associated with accounting irregularities in Indonesia. The results are robust after using alternate measurements of accounting irregularities proxies and readability indexes. This paper also finds that the corporate governance mechanism and foreign shareholder structure did not moderate the association between annual report readability and accounting irregularities. This implies that the readability of annual reports does not have the ability to predict the likelihood of accounting irregularities in Indonesia. It is possible that firms with accounting irregularities will be inclined to voice simpler stories which can counteract the tendency of lies to be linguistically more complex. Indeed, according to the Education First English Proficiency Index, Indonesia is categorized at a low proficiency level. Furthermore, this paper also discovers that the average readability of the management discussion and analysis (MD&A) of Indonesian public listed firms is at an ideal score by having a Fog Index of 13.32. The findings provide valuable insights for stakeholders in using annual reports for their decision-making, especially in an emerging market setting and non-English speaking countries.

Research limitations/implications

It is important to interpret the findings in the context of the limitations of the readability index the authors used. It is argued that Fog Index, Flesch-Kincaid and Flesch Reading Ease have their own limitations as considered inadequate to be used in the context of business and accounting narratives that are adult-oriented and specialist in nature (Jones and Shoemaker, 1994; Loughran and McDonald, 2014). Another caveat relates to the use of proxies for accounting irregularities. The M-Score and F-Score have some limitations in which, among others, were determined without considering the normal level of accruals or period where manipulations were absent (Ball, 2013).

Practical implications

One reason underlying the result is that Indonesian firms, in general, do not consider the complexity of the annual report, particularly MD&A disclosures, as a tool to mask financial reporting irregularities. It is also possible that firms with accounting irregularities will incline to voice simpler stories because it is difficult to be untruthful (Lo et al., 2017). Indeed, according to Education First English Proficiency Index, Indonesia was categorized in low proficiency level and ranked 61st out of 100 countries being surveyed (Education First, 2019). As policymakers, locally and globally, are calling for more simplified reports including a plain English approach, the study can be insightful to their deliberations. It suggests that policymakers need to consider a country’s English proficiency, writing skills, regulatory environment and corporate policy on shaping the complexity and narrative of a firm’s communications.

Originality/value

The study contributes to a scarcity of research that investigates English-written annual reports in non-English speaking countries (Jeanjean et al., 2015; Lundholm et al., 2014). As such, the study findings provide insights related to MD&A in an under-researched area and contribute to improving MD&A not only in Indonesia but also in neighbor countries that share similar social, political and economic characteristics. Also, this study is important for foreign institutions or individuals investing on Indonesian-listed firms. According to Candra (2016), approximately 60% of companies listed in the Indonesia stock exchange are owned by foreign individuals or institutions. They rely greatly on the English texts of annual reports to understand the companies’ financial performance. Moreover, La Porta et al. (2002) asserted that firms with a majority of foreign shareholders (dominantly owned by foreign investors) are more likely to face information asymmetry, primarily due to geographical factors and language barriers.

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Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 1 November 1935

J.M. Shoemaker, T.B. Rhines and H.H. Sargent

THE remarkable strides made by designers of commercial and military aircraft during recent years have been most strikingly evidenced by the ever‐increasing performance of…

Abstract

THE remarkable strides made by designers of commercial and military aircraft during recent years have been most strikingly evidenced by the ever‐increasing performance of their products. This progress has been gained, to a great extent, in two ways: by improving the aerodynamic cleanness of the aeroplane and by increasing the specific power output of the engine. However, the successful utilisation of both methods has been complicated by the difficulty of providing the higher‐powered engines with proper cooling and accessibility while retaining the cleanness of the aeroplane. Each addition to the power‐plant output has not only further complicated that unit and made necessary more controls and accessories, but has also made the engine harder to cool. Designing the cowl to favour the cleanness of the aeroplane has often proved to be detrimental to both proper cooling and accessibility.

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Aircraft Engineering and Aerospace Technology, vol. 7 no. 11
Type: Research Article
ISSN: 0002-2667

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Article
Publication date: 1 December 2002

Brian A Rutherford

This paper reports the results of an interview programme designed to investigate the processes involved in the production of narrative accounting statements, and…

Abstract

This paper reports the results of an interview programme designed to investigate the processes involved in the production of narrative accounting statements, and specifically the Operating and Financial Review, with a view to identifying the effect such processes might have on the content and character of such statements. A range of features of the production process is identified with the potential to affect the content and character of statements, and thus to influence the relationship between the content and character of statements and the characteristics of the companies producing them, such as size, performance, risk and sector. The pattern of potential impacts is likely to be a complex one. It is suggested that preparers face a range of choices in the preparation of narrative financial statements that may be wider than some realise.

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Journal of Applied Accounting Research, vol. 6 no. 3
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 31 July 2007

Philip M. Linsley and Michael J. Lawrence

The purpose of this paper is to examine risk disclosures by UK companies within their annual reports. Tests are performed to measure the level of the readability of the…

Abstract

Purpose

The purpose of this paper is to examine risk disclosures by UK companies within their annual reports. Tests are performed to measure the level of the readability of the risk disclosures and to assess whether directors are deliberately obscuring bad risk news.

Design/methodology/approach

The paper draws upon methodologies developed in prior empirical studies of annual report readability. Thus it uses the Flesch Reading Ease formula to measure the readability of the risk disclosures and coefficients of variation are used to measure obfuscation. A content analysis approach is adopted to identify risk disclosures.

Findings

The paper finds that the mean Flesch reading ease ratings for the sample companies are all below 50 indicating that the level of readability of the risk disclosures is difficult or very difficult and this supports prior research examining the readability of sample passages in annual reports. No evidence is found to suggest that directors are deliberately obfuscating or concealing bad risk news through their writing style.

Research limitations/implications

The paper also finds that the Flesch reading ease ratings measure the readability, not the understandability, of disclosures and whilst actions can be taken to minimise problems associated with reliability when performing content analysis they cannot be wholly eliminated.

Practical implications

The paper shows that there have been calls for improved risk disclosures to enable stakeholders to better understand a company's risk position. Requiring directors to issue extra risk information will not, however, lead to enhanced risk communication unless the readability of the risk disclosures is also improved.

Originality/value

In this paper it is shown that there have been no prior studies that focus upon testing for readability and obfuscation in risk disclosures. It is important that transparent risk information is provided to the marketplace and therefore this study is valuable in its examination of the clarity of communication of published risk information.

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Accounting, Auditing & Accountability Journal, vol. 20 no. 4
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 October 1999

Robin Sydserff and Pauline Weetman

Readability formulas have been criticised as a method for scoring accounting narratives because of their focus on word‐ and sentence‐level features and not on whole‐text…

Abstract

Readability formulas have been criticised as a method for scoring accounting narratives because of their focus on word‐ and sentence‐level features and not on whole‐text aspects, their lack of regard for the interests and motivation of the reader, and their inappropriateness for evaluating adult‐based and technical accounting narratives. The literature of linguistics offers theoretical and practical validation for application of a texture index which addresses these criticisms. The paper shows how the general model drawn from applied linguistics can be tailored to the specific situation of an accounting narrative – the Operating and Financial Review. Rules which provide for objectivity in replication are specified and illustrated for a sample narrative. Illustrative empirical analysis shows that there is no evidence of association with the Flesch readability score. This suggests that the texture index is potentially a powerful tool for analysis of accounting narratives and association testing.

Details

Accounting, Auditing & Accountability Journal, vol. 12 no. 4
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 1 October 2002

Robin Sydserff and Pauline Weetman

This paper responds to a call in the literature for methodological and empirical studies to advance research into accounting narratives, in the light of acknowledged areas…

Abstract

This paper responds to a call in the literature for methodological and empirical studies to advance research into accounting narratives, in the light of acknowledged areas of weakness and gaps in the accounting literature and with a view to investigating impression management. A general line of critique in the accounting literature points to a need to expand both the syntactic and thematic dimensions, with a particular focus on developing objective methods of analysis that allow computer‐based measurement. The paper draws on the literature of managerial business communications, supported by that of applied linguistics, in bringing to accounting research a transitivity index and the application of DICTION analysis. Both have the potential to extend computer‐based analysis of accounting narratives, subject to careful initial research design and specification. The potential for a richer empirical analysis is demonstrated through an illustrative empirical application.

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Accounting, Auditing & Accountability Journal, vol. 15 no. 4
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 5 April 2013

Gerard Stone and Lee D. Parker

This paper aims to examine and critique the accounting literature's dominant readability formula, the Flesch formula. Furthermore, the paper sets out to propose refinement…

Abstract

Purpose

This paper aims to examine and critique the accounting literature's dominant readability formula, the Flesch formula. Furthermore, the paper sets out to propose refinement and augmentation to the formula with a view to expanding its applicability and relevance to researchers' attempts at better understanding and critiquing the effectiveness of accounting communications. This aim extends to setting a more robust foundation for informing policymakers' and practitioners' interest in implementing more effective communications with their target stakeholders.

Design/methodology/approach

The paper offers an historically informed methodological critique of the current articulation and application of the Flesch formula, both generally and in accounting research. This critique forms the basis for developing proposed revisions and supplementary measures to augment Flesch's coverage. These are presented with sample empirics.

Findings

Illustrative examples suggest that it is feasible and desirable to apply a revised formula that reduces Flesch's misplaced emphasis on word length by respecifying its sentence length variable, a probable cause of low readability. A reader attribute score further enhances the formula by integrating the considerable impact of readers' attributes on readability and accounting communication effectiveness. Supplementary measures, comprising non‐narrative communications dimensions, are introduced as a foundation for further research.

Originality/value

The paper provides not only critique but also refinement and augmentation of the much used Flesch readability formula for accounting communications research. It offers a first stage approach to encompassing potentially important communication elements such as readers' attributes, tables, graphs and headings, to date critiqued as potentially important but left unattended by accounting researchers. This offers the prospect of extending Flesch's application to contemporary accounting communications issues and questions.

Details

Qualitative Research in Accounting & Management, vol. 10 no. 1
Type: Research Article
ISSN: 1176-6093

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Article
Publication date: 1 July 2000

Catherine Gowthorpe

So far, there has been little research on the extent or implications of corporate reporting on the Internet. This paper identifies the type of work which has been done to…

Abstract

So far, there has been little research on the extent or implications of corporate reporting on the Internet. This paper identifies the type of work which has been done to date in this new field, and proceeds to outline some possible areas and questions for future research work. The discussion falls into the five following principal areas: Corporate governance, and the nature of the stakeholder/company relationship; The company’s viewpoint: incentives and disincentives for expanded financial reporting; Verification: the changing role of audit; Information/communication issues; Ethical, behavioural and philosophical aspects.

Details

Journal of Applied Accounting Research, vol. 5 no. 3
Type: Research Article
ISSN: 0967-5426

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