The fog index in accounting research: contributions and challenges

Efretuei, E; Hussainey, Khaled

doi:10.1108/jaar-09-2021-0243

Cited by 8 publications

(5 citation statements)

References 129 publications

(339 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In Table 4, the Pearson's correlation coefficient reveals an association between variables in the three panels, enabling us to measure the linear correlation between two sets of data and ignore the type of relationship, as follows: According to Panel A, the FOG indicator indirectly reduces investors' perceptions of management credibility (Ajina et al, 2016;Efretuei & Hussainey, 2022). The results thus indicate that more management of earnings leads to less readable disclosures, using the FOG index as an inverse association at a significance level of 1% (p < 0.01).…”

Section: Resultsmentioning

confidence: 99%

“…The FOG index, the index most used in the literature to measure degree of readability in English (Ajina et al, 2016), is calculated based on syllables per word and words per sentence. Efretuei and Hussainey (2022) argued that the challenge in using the FOG index to measure corporate report readability in English lies in determining the inputs of TW as words per sentence, and CW as the percentage of complex words. Readability is calculated as follows:…”

Section: Study Variable Definitions: Readability Measures Emp Indicat...mentioning

confidence: 99%

“…Although the FOG index was computed using many text analysis software programs for readability research in English, the most common program is the Linguistic Inquiry and Word Count (LIWC), designed by psychologists Pennebaker et al (2001). Various scholars have used the LIWC to measure readability (Chiu et al, 2022;Efretuei & Hussainey, 2022;Li, 2008). Our study uses the LIWC (Version 22) to measure the FOG index of 360 UK corporate reports for 72 firms from 2017 to 2021.…”

Section: Study Variable Definitions: Readability Measures Emp Indicat...mentioning

confidence: 99%

See 2 more Smart Citations

Examining the Readability of Accounting Narratives Derived From Earnings Management

Gutiérrez-Ponce,

Chamizo González,

Al-Mohareb

2023

Journal of Business Economics and Management

View full text Add to dashboard Cite

This study investigates whether language difference affects the readability scores of accounting narratives derived from earnings management practices in 226 companies in the UK, Spain, and Jordan from 2017 to 2021.Our analytical method applies three of the most significant readability measures based on the characteristics of each language, as well as multiple linear and logistic regression models, to demonstrate the impact of language differences on the readability of accounting narratives. The findings indicate that earnings management practices significantly affect the readability of accounting disclosures/narratives, and that past financial profitability moderates this relationship. The implications of the findings reported will help decision-makers better understand the quality and readability of accounting narratives derived from companies’ earnings management. Our analysis also has implications for how stakeholders, accounting policymakers, financial statement auditors, and academics understand the relationship between accounting reporting narratives and earnings management.

show abstract

Section: Resultsmentioning

confidence: 99%

Section: Study Variable Definitions: Readability Measures Emp Indicat...mentioning

confidence: 99%

Section: Study Variable Definitions: Readability Measures Emp Indicat...mentioning

confidence: 99%

See 1 more Smart Citation

Examining the Readability of Accounting Narratives Derived From Earnings Management

Gutiérrez-Ponce,

Chamizo González,

Al-Mohareb

2023

Journal of Business Economics and Management

View full text Add to dashboard Cite

show abstract

“…Language and writing style are, however, determining factors in interpretation of business reports. Although the accounting literature that analyses readability research in English varies widely (Ajina et al, 2016; Efretuei & Hussainey, 2022), it attests to the challenges of measuring readability of accounting narratives for corporate reports in Arabic because Arabic has characteristics that differ from other languages. Ma'arif (2020) argues that Arabic has rich vocabulary, word integration, and sentence structure that make it orthographically different from other languages.…”

Section: Methodsmentioning

confidence: 99%

Does corporate governance influence readability of the report by the chairman of the board of directors? The case of Jordanian listed companies

Herenia,

Julián,

Al‐mohareb

2024

Corp Soc Responsibility Env

View full text Add to dashboard Cite

This study investigates whether readability of the president's statement is linked to both company performance and factors related to corporate governance in an emerging market context. We analyse Jordanian manufacturing companies listed on the Amman Stock Exchange (ASE) during the period 2017–2021. An exploratory study using panel data from ASE, parametric correlations, and regression models shows the relationship between readability of the president's statement, corporate governance, and characteristics of the board of directors. The results indicate that corporate governance significantly moderates readability of the president's statement and the firm's performance. The results also show a relationship between readability of the chairman's statement and directors' accounting experience and confirm that independence of the board of directors and concentration of ownership affect readability of the accounting disclosures in the chairman's statement. Finally, poor board compliance significantly mitigates the association between board features and readability of the chairman's statement. These findings help to explain how and why firms adjust their information disclosure and transparency practices, affecting corporate reporting credibility and efficacy. This study is one of few to examine how board features affect readability of the president's statement within the Jordanian legal framework, which is plagued by poor board compliance due in part to constant amendments.

show abstract

“…Fog index (FOG), Flesch Reading Ease (FRE) and Flesch-Kincaid grade (FKG) (Li, 2008;Roman et al, 2019). Regulators have put forth the utilization of these indices as a potential metric for evaluating the content of corporate filings (Efretuei and Hussainey, 2022). It is important to note that readability indices FOG and FKG denote a direct (inverse) relationship with complexity (readability), whereas the FRE index denotes an inverse (direct) relationship with complexity (readability).…”

Section: Research Design 41 Measures Of Annual Report Readabilitymentioning

confidence: 99%

Does IFRS convergence affect the readability of annual reports by Indian listed companies?

Mohammad

Kumar

2023

JAAR

View full text Add to dashboard Cite

PurposeThe purpose of this study is to investigate the influence of IFRS convergence on annual report readability in an emerging market context, with an emphasis on the contents of management discussion and analysis (MD&A), notes to the accounts (Notes) and the whole annual report.Design/methodology/approachThe study performs firm-fixed effect regression on a sample of 143 Indian listed companies over a period spanning from 2012 to 2021 to examine the influence of IFRS convergence on readability. This assessment primarily focuses on broader spectrums of readability dimensions, namely annual report length and complexity, wherein complexity is measured using the Gunning Fog, Flesch Reading ease and Flesch-Kincaid grade index.FindingsAs Indian firms shift to IFRS reporting, the findings suggest that annual reports have become significantly lengthier and more complex, causing deterioration in readability. The Notes section, in particular, exhibits the most significant increase in length and complexity, followed by the entire annual report and MD&A section. Furthermore, the findings also indicate that the complexity of the Notes section is instrumental in the observed complexity growth of the whole annual report in the post-IFRS period.Research limitations/implicationsThe current study employs readability indices rather than directly taking into consideration the opinions of actual users of annual reports to determine readability. As a result, the study does not provide direct evidence on how information in annual reports affects users' readability.Practical implicationsThe findings provide insightful information to managers and policymakers about the difficulties stakeholders may encounter while reading IFRS-based annual reports, which ultimately impact their investment decisions. Thus, there is an important managerial implication from this, depending upon the severity of complexity corporations participate in while complying with IFRS in the post-IFRS period.Originality/valueAnalyzing the influence of exogenous information shock, such as IFRS convergence, on readability is critical, particularly for emerging markets like India, where a lack of financial literacy and weaker enforcement already have detrimental effects on the capital market. In light of this, the current study provides a comprehensive examination of the impact of IFRS convergence on annual report readability and contributes to the growing IFRS literature in the less explored emerging market context.

show abstract

The fog index in accounting research: contributions and challenges

Cited by 8 publications

References 129 publications

Examining the Readability of Accounting Narratives Derived From Earnings Management

Examining the Readability of Accounting Narratives Derived From Earnings Management

Does corporate governance influence readability of the report by the chairman of the board of directors? The case of Jordanian listed companies

Does IFRS convergence affect the readability of annual reports by Indian listed companies?

Contact Info

Product

Resources

About