Does intellectual capital and corporate governance have an impact on annual report readability? Evidence from an emerging market

Dalwai, Tamanna; Mohammadi, Syeeda Shafiya; Chugh, Gaitri; Salehi, Mahdi

doi:10.1108/ijoem-08-2020-0965

Cited by 30 publications

(34 citation statements)

References 132 publications

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“…Our board size result contradicts with Ginesti et al. (2017) who found no effect of board size on readability in the Italian context but is consistent with Dalwai et al. (2021b) in the Omani financial sector.…”

Section: Resultscontrasting

confidence: 71%

“…, 2018), our findings call for the use of a plain English text that bears a neutral tone with a reduction in the length of annual reports to avoid miscommunication with the firms' stakeholders. Policymakers may therefore insist on using “Plain English” in writing the annual reports similar to the US Securities Act of 1993 (Dalwai et al. , 2021b).…”

Section: Discussionmentioning

confidence: 99%

“…Bank age : older banks are expected to have complex operations and hence the narrative reporting on these operations becomes difficult to read (Dalwai et al. , 2021a, b; Hassan et al. , 2019).…”

Section: Methodsmentioning

confidence: 99%

“…Banks' managers are inclined to provide easy-to-read narratives so as to reduce agency costs or avoid blame for being self-interested (Dalwai et al. , 2021a, b). Alternatively, banks with poor performance have a greater incentive to obfuscate this news, resulting in more difficult-to-read annual reports (Davis et al.…”

Section: Methodsmentioning

confidence: 99%

“…, 2009; Dalwai et al. , 2021a, b; Huang et al. , 2014; Li, 2010; Loughran and McDonald, 2011; Smith and Taffler, 2000).…”

Section: Introductionmentioning

confidence: 99%

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Tone, readability and financial risk: the case of GCC banks

Hassan

Abu-Abbas

Kamel

2021

JAEE

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PurposeThe authors investigate the impact of disclosure tones and financial risk on the readability of annual reports in the banking sector. The authors also examine the moderating effect of banks' financial risk on the tone–readability relationship.Design/methodology/approachThis study relies on the agency theory and the social psychology theory to formulate its testable hypotheses and explain the empirical findings. It uses a sample of 390 bank-year observations from banks listed in the Gulf Cooperation Council (GCC) Stock Exchanges during the period 2014–2019. It also employs random effect regressions to analyze the data and to examine the reverse causality/endogeneity in order to obtain robust findings.FindingsThis study’s results demonstrate that easy (difficult) to read annual reports is significantly associated with positive (negative) tone. Bank managers characterized as “too positive/optimistic” and banks with higher financial risks publish less readable annual reports. The results also show that the interaction between negative tone and a bank's financial risk is inversely associated with reading difficulty, indicating that managers prepare easy text to clarify causes of their banks’ high risks, yet they communicate this easy text with a negative tone that reflects their feelings/emotions towards the financial risks of their banks.Practical implicationsThis study’s findings call for the use of a plain English text that bears a neutral tone and urge financial analysts to go beyond the financial aspects of annual reports. They also stimulate policymakers to draft policies, which ensure the presence of audit committee members who possess a broad expertise to uncover the linguistic issues embedded in the annual reports.Originality/valueTo the best of the authors' knowledge, this is the first study dedicated to exploring the tone–readability association in the GCC's banking sector.

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Section: Resultscontrasting

confidence: 71%

Section: Discussionmentioning

confidence: 99%