The influence of business strategy on annual report readability

Lim, Edwin Kia Yang; Chalmers, Keryn; Hanlon, Dean

doi:10.1016/j.jaccpubpol.2018.01.003

Cited by 153 publications

(162 citation statements)

References 98 publications

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“…Bentley et al () found that prospectors are more likely to experience financial reporting irregularities and have weak internal controls than are defenders. Lim et al () demonstrated that prospectors exhibit poor annual report readability and evident negative and uncertain tones. In this section, we examine the moderating effect of earnings management on the relation between business strategy and environmental protection.…”

Section: Cross‐sectional Analysesmentioning

confidence: 99%

“…Second, it adds to the growing literature on the effect of business strategy on firms' investment decisions, especially for investments in intangible assets such as CSR. Previous works focused on impacts of business strategy on firm per se or accounting issues, such as firm performance (Hambrick, ), CEO compensation (Ittner, Larcker, & Rajan, ), financial reporting irregularities and audit efforts (Bentley, Omer, & Sharp, ), auditor reporting (Chen et al, ), annual report readability (Lim, Chalmers, & Hanlon, ), and tax aggressiveness (Higgins et al, ). Our study emphasizes the effect of business strategy on long‐term investment in intangible assets.…”

Section: Introductionmentioning

confidence: 99%

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Business strategy and firm efforts on environmental protection: Evidence from China

et al. 2019

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Although business strategy plays a fundamental role in firm operations, whether and how business strategy affects firms' environmental protection behaviors remain unclear. On the basis of a typical emerging market, we show that firms following prospector strategies take more environmental protection actions than do those following defender strategies. Our findings are robust to endogeneity checks and alternative measures of business strategy. We further find that prospectors engage in more environmental activities than do defenders when the degree of financial constraint or earning management is high. Our results are particularly pronounced in state-owned enterprises, heavy-polluting industries, and firms located in regions with strict environmental regulations. Overall, this study provides clear policy implications for regulators concerned with environmental protection.

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Section: Cross‐sectional Analysesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Business strategy and firm efforts on environmental protection: Evidence from China

et al. 2019

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“…Although some current studies use also Fog index (Lo et al, 2017;Lim et al, 2018), we detected also application of FRE readability measure (Moffitt & Burns, 2009), texture index (Sydserff & Weetman, 1999, p. 475), Cloze procedure (Adelberg, 1979;Smith & Taffler, 1992), Lix (Smith & Taffler, 1992), Flesch Fog, Lix (Courtis, 1995), the Gunning measure of readability (Heath & Phelps, 1984), C-Test, the MIT test and the The Science Virtual Test SVT test (Jones & Smith, 2014). However, further based on the basic predictions of the readability theories, researchers began to raise questions on why variability in readability occurs?…”

Section: Readability and Obfuscation Research In Accountingmentioning

confidence: 71%

Do Poor and Good Performing Companies Report Differently? The Readability and Impression Management in Corporate Narrative Documents: Evidence From Northern Europe

Pasko

Minta

Rudenko

et al. 2020

Business: Theory and Practice

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The purpose of this paper is to assess the effect of financial performance on textual features of the CEO’s statement. Specifically, given the incentives of poorly performed companies engage in impression management, the study investigates whether companies’ reporting strategy hinges on its financial performance. The research questions are tested through analysis of a variety of textual features in the CEO’s statement of 30 good and 30 poor performed companies listed on NASDAQ OMX Stockholm. We apply a range of textual characteristics drawn mostly from prior studies in given realm to the specific research of impression management in the CEO’s report. Overall our findings do not corroborate impression management claim, as six out of seven our results run counter to assertions made by impression management research. We found although evidence that poorly performed companies more focused on future compared with good performed companies. Finally, we conclude by discussing our results and outlining some avenues for further research.

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“…A FOG higher than 18 suggests the text is virtually unreadable (Li, ). The FOG readability calculation tool has been successfully used in prior quantitative studies exploring financial disclosure obfuscation (Ajina et al, ; Chakrabarty et al, ; Lim, Chalmers, & Hanlon, ; Merkley, ) and has historically been a principal financial reporting readability measure (Bonsall, Leone, Miller, & Rennekamp, ). Following previous research (Cheung & Lau, ; Li, ), the FOG readability measure is computed for the text in each text file using the free and publicly available Lingua::EN::Fathom module in Perl code located at http://search.cpan.org/~kimryan/Lingua-EN-Fathom-1.19/.…”

Section: Methodsmentioning

confidence: 99%

Disclosure characteristics of firms being investigated by the SEC

Demaline

2019

J Corp Accounting Finance

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The purpose of this study is to explore the characteristics of managers' 10-K disclosures concerning U.S. Securities and Exchange Commission (SEC) investigations. This study examined the quantitative linguistic characteristics of 171 company disclosures discussing the firms' involvement in an SEC investigation related to fraudulent financial reporting. The results suggest that these disclosures have a relatively negative sentiment and were relatively difficult to read. The results failed to provide sufficient statistical evidence to support the notion that managers systematically attempt to blame external parties for the potential wrongdoing and related investigation. The study results add to the stream of research related to impression management in corporate disclosures while also supplementing research on how companies respond to negative events such as regulatory investigations. This study may be of interest to financial regulators, investors, and accounting standards setters, all of whom are interested in maximizing the usefulness of financial information. K E Y W O R D SAAER, financial disclosure, impression management, readability, SEC enforcement, tone

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The influence of business strategy on annual report readability

Cited by 153 publications

References 98 publications

Business strategy and firm efforts on environmental protection: Evidence from China

Business strategy and firm efforts on environmental protection: Evidence from China

Do Poor and Good Performing Companies Report Differently? The Readability and Impression Management in Corporate Narrative Documents: Evidence From Northern Europe

Disclosure characteristics of firms being investigated by the SEC

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