Annual report readability and stock liquidity

Boubaker, Sabri; Gounopoulos, Dimitrios; Rjiba, Hatem

doi:10.1111/fmii.12110

Cited by 74 publications

(49 citation statements)

References 133 publications

(225 reference statements)

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“…= 1 if the observation belongs to the post-IFRS period (≥ 2010), or 0 otherwise Concept: In Brazil, the main milestone of the IFRS convergence process was the enactment of Law n. 11,638/2007. The approach of distinguishing harmonization with IFRS is in accordance with the studies of Boubaker et al (2019) and of Cheung and Lau (2016). A positive result is expected for the variable, because harmonization with IFRS can add an incremental improvement in the informational environment.…”

Section: Ifrssupporting

confidence: 55%

“…Cheung and Lau (2016) show that the annual reports of Australian companies are longer but less complex in the post-IFRS period. Boubaker, Gounopoulos, and Rjiba (2019) highlight that harmonization with IFRS improved the readability of the annual report of French companies. In a multicountry study, Lang and Stice-Lawrence (2015) suggest that the textual attributes improved after harmonization with IFRS.…”

Section: Harmonization With Ifrs and Itsmentioning

confidence: 99%

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Readability as a measure of textual complexity: determinants and evidence in Brazilian companies

Souza

Borba

2022

Rev. contab. finanç.

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The aim of this article was to evaluate the effect of company earnings and of harmonization with IFRS on the readability of Management Reports in the Brazilian stock market. There is a gap to be filled both in the elaboration and adaptation of readability measures to the context studied, as the studies tend to replicate the original formulas, and in identifying the determinants of the readability of Brazilian company reports, as the research in this field remains in its infancy and the results are inconclusive. The results provide indications for investors to identify complex textual information and may help public policymakers to establish a simple writing manual, along the lines of the SEC’s 1998 Plain English Handbook. The modified metrics and the one developed overcome the criticisms regarding the use of readability formulas in accounting research and could be used in substitution of the original metrics in future studies. An econometric model was used that presents the determinants of readability. Readability was calculated for the Results Analysis section of the Management Report. The resulting construct is understood via three attributes: persistence, current performance, and the reference benchmark. Harmonization with IFRS is a dummy variable, which delimits the pre- and post-IFRS periods. The hypotheses were tested in a sample of Brazilian companies made up of 714 company-year observations covering the period from 2006 to 2019. The descriptive results show that there is an apparent improvement in the readability of the reports in the pre- and post-IFRS period comparison. The econometric evidence shows that, in general, companies with persistent and positive earnings present less complex reports and are more likely to have highly readable reports, because managers publish reports with better readability to signal positive results to the market.

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Section: Ifrssupporting

confidence: 55%

Section: Harmonization With Ifrs and Itsmentioning

confidence: 99%

Readability as a measure of textual complexity: determinants and evidence in Brazilian companies

Souza

Borba

2022

Rev. contab. finanç.

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“…They further show that the net buying behaviour of small investors is positively associated with residual tone, while larger investors tend to sell on this signal. Finally, difficult-to-read annual reports hinder investors' ability to process and analyse information, thereby reducing their willingness to trade, which decreases stock liquidity (Boubaker et al, 2019).…”

Section: Trading and Liquidity Effectsmentioning

confidence: 99%

Narrative Reporting: State of the Art and Future Challenges

Michelon

Trojanowski

Sealy

2021

Accounting in Europe

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Narrative reporting, both in relation to financial and non-financial information, is increasingly used and often mandated, with significant managerial discretion regarding content. As policy makers consider reporting as a tool for regulation to steer the behaviour of companies towards improving practices and performance upon which they have to disclose, the aim of this paper is to provide the state of the art in the academic literature on narrative reporting and identify future challenges. In order to do so, the paper investigates three questions: (1) How has the quality of narrative reporting been defined?(2) What narrative information is required and used by various stakeholders? (3) What are the real effects of narrative reporting? In answering these three questions, our review also gives implications for both future academic research and policy makers.

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“…Economic theory suggests that bid-ask spreads tend to increase in the presence of risk and uncertainty ( Glosten and Milgrom, 1985 ; Hasbrouck, 1988 ), which in turn leads to the deterioration of liquidity in the markets. Liquidity in financial markets is affected by investors’ ability to process information ( Boubaker et al., 2019 ). Liquidity also becomes a crucial policy area during financial crises ( Brunnermeier, 2009 ).…”

Section: Introductionmentioning

confidence: 99%