Purpose Informational efficiency is a fundamental aspect of capital market quality, and therefore, regulators, managers and practitioners attempt to find ways to improve the informational efficiency. Since prior studies primarily focus on the numerical attributes of corporate reporting, it is not yet adequately known whether or not the linguistic attributes of corporate reporting affect informational efficiency. Thus, the purpose of this paper is to examine whether corporate reporting readability (readability), as an important linguistic attribute of corporate reporting, affects informational efficiency. Design/methodology/approach To measure readability, this paper uses Fog index. Moreover, to measure informational efficiency, the paper uses stock return variance ratios. Findings The findings reveal a positive and significant association between readability and informational efficiency. Moreover, the findings show that the association of readability and informational efficiency is stronger for firms facing higher information asymmetry. The findings further document the spillover effect of readability, in the sense that the readability of economically related public firms affects a firm’s informational efficiency. Overall, the results support the arguments that readability enhances informational efficiency. Originality/value This study contributes to the literature by providing evidence on the internalities and externalities of readability in the context of informational efficiency. Thus, the study will be of interest to regulators, managers and practitioners, especially in emerging capital markets, who tend to find practical and easy ways to improve informational efficiency.

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En este trabajo se investiga si la supervisión de la Comisión de Valores reduce la complejidad de los informes financieros. Para ello se utilizan las cartas de opinión (comment letters) de la Comisión de Valores de Irán. Además, para medir dicha complejidad, se emplea el índice de Fog. Usando un diseño de diferencia en diferencias con la aproximación propensity score matching, se encuentra que la supervisión de la Comisión de Valores reduce esta complejidad. Además, se muestra que el impacto de la supervisión de las comisiones de valores en la complejidad de los informes financieros es mayor para las empresas con mayor calidad de gobierno corporativo.  También se documenta que este impacto (1) no se limita a un año y persiste al menos dos años después, y (2) no es mayor para las empresas que reciben más cartas de opinión (comment letters). Además, se constata el efecto indirecto de la supervisión de la comisión de valores, en el sentido de que las empresas que no reciben ninguna carta de opinión (comment letters) reducen la complejidad de sus informes financieros si la comisión de valores ha hecho comentarios sobre la empresa líder del sector o sobre un competidor cercano. En definitiva, este artículo proporciona, por un lado, evidencia relacionada con el debate internacional sobre si las comisiones de valores podrían tener efectos beneficiosos en la información financiera que elaboran las empresas y, por otro, contribuye a la literatura sobre la complejidad de los informes financieros y los factores que reducen la misma, lo cual ocupa un lugar destacado entre los temas más importantes en el contexto de la información financiera internacional. We investigate whether securities commission oversight reduces the complexity of financial reporting (complexity). To measure the securities commission oversight, we use comment letters from securities commission of Iran. Further, to measure the complexity, we employ the Fog index. Using a difference-in-differences design with a propensity score matching approach, we find that the securities commission oversight reduces the complexity. Furthermore, we document that the impact of securities commission oversight on the complexity is stronger for firms with higher corporate governance quality.  In addition, we document that the impact of securities commission oversight on the complexity (1) is not limited to one year and persists through at least two years later; and (2) is not higher for firms that receive more comment letters. We further document the spillover effect of securities commission oversight, in the sense that firms not receiving any comment letter reduce their complexity if the securities commission has commented on the industry leader or a close rival. Collectively, this paper, on the one hand, provides related evidence for the international debate on whether securities commissions could provide beneficial effects; and on the other hand, contributes to the literature on the complexity and its reducing factors that are among the most important issues in the context of international financial reporting.

PurposeWhile prior research in the area of intellectual capital (IC) disclosure has mainly focused on firm, board and audit committee characteristics, there is little research on whether managerial characteristics are associated with IC disclosure. This study aims to examine the relationship between managerial ability (MA) and the extent of IC disclosure.Design/methodology/approachThe study sample comprises 1,098 firm-year observations of Iranian listed firms during 2012–2017. This study uses the checklist developed by Li et al. (2008) and adopts a content analysis approach and calculates the IC disclosure index in 62 dimensions within three categories: human capital, structural capital and relational capital. To measure MA, this study uses the managerial ability score (MA-Score) developed by Demerjian et al. (2012) for Iranian firms.FindingsThe results show that MA is significantly and negatively associated with the overall extent of IC disclosure and all the three components of IC (human capital, structural capital and relational capital). Further analysis shows that the interaction between MA and firm performance is positive and significant, suggesting that the negative relationship between MA and IC disclosure is less pronounced for high-performing firms. This study addresses the potential endogeneity issue by using the propensity score matching approach. The findings are also robust to the alternative measure of MA.Originality/valueThis study contributes to both the MA literature and the IC disclosure literature. To the best of the authors' knowledge, this study is the first to provide empirical evidence on the relationship between MA and IC disclosure.

PurposeWhile existing research explores the impact of audit market competition on audit fees and audit quality, there is limited investigation into how competition in the audit market influences auditors' writing style. This study examines the relationship between audit market competition and the readability of audit reports in Iran, where competition is particularly intense, especially among private audit firms.Design/methodology/approachThe sample comprises 1,050 firm-year observations in Iran from 2012 to 2018. Readability measures, including the Fog index, Flesch-Reading-Ease (FRE) and Simple Measure of Gobbledygook (SMOG), are employed to assess the readability of auditors' reports. The Herfindahl–Hirschman Index (HHI) is utilized to measure audit market competition, with lower index values indicating higher auditor competition. The concentration measure is multiplied by −1 to obtain the competition measure (AudComp). Alternative readability measures, such as the Flesch–Kincaid (FK) and Automated Readability Index (ARI) are used in additional robustness tests. Data on textual features of audit reports, auditor characteristics and other control variables are manually collected from annual reports of firms listed on the Tehran Stock Exchange (TSE).FindingsThe regression analysis results indicate a significant and positive association between audit market competition and audit report readability. Furthermore, a stronger positive and significant association is observed among private audit firms, where competition is more intense compared to state audit firms. These findings remain robust when using alternative readability measures and other sensitivity checks. Additional analysis reveals that the positive effect of competition on audit report readability is more pronounced in situations where the auditor remains unchanged and the audit market size is small.Originality/valueThis paper expands the existing literature by examining the impact of audit market competition on audit report readability. It focuses on a unique audit market (Iran), where competition among audit firms is more intense than in developed countries due to the liberalization of the Iranian audit market in 2001 and the establishment of numerous private audit firms.