Psychological differentiation, psychophysiological arousal, hearing capacity, and ability to lipread unrelated sentences presented in a silent technicolor film were investigated in 62 children (mean age 10 years, 4 months), classified into three hearing categories (normal, mild to moderate hearing loss, severe hearing loss) based on their average hearing threshold in the range of speech frequencies for their best ear. All subjects were administered the Rod and Frame Test, Craig Lipreading Inventory, and skin conductance measures under two conditions (pre‐task and task). The results showed that the ability to lipread sentences from a film was related significantly to psychological differentiation (cognitive style) and pre‐task conductance level, but was not related to hearing capacity or task conductance level. The best predictors of lipreading ability were successful performance on the Rod and Frame Test and high increases in skin conductance from pre‐task to task situation.