Readability of Annual Reports on the Vienna Stock Exchange: A Test of Management Obfuscation Hypothesis
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F62156489%3A43110%2F22%3A43921464" target="_blank" >RIV/62156489:43110/22:43921464 - isvavai.cz</a>
Result on the web
<a href="http://dx.doi.org/10.18267/j.cebr.307" target="_blank" >http://dx.doi.org/10.18267/j.cebr.307</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.18267/j.cebr.307" target="_blank" >10.18267/j.cebr.307</a>
Alternative languages
Result language
angličtina
Original language name
Readability of Annual Reports on the Vienna Stock Exchange: A Test of Management Obfuscation Hypothesis
Original language description
This research examines the relation between annual report readability and company performance in a German-speaking country, Austria. The incomplete revelation hypothesis, management obfuscation hypothesis and agency theory assume that firms with lower performance strategically use readability in their disclosures to obfuscate negative results. For investors, reading, analysing, and interpreting data becomes a costly affair; this weakens the negative effect of such data on a firm's reputation and share price. We use LIX and Flesch formulas to measure the readability of letters to the shareholders and/or interviews with the board in annual reports. The sample consists of 37 companies that are listed on the Prime Market of the Vienna Stock Exchange and their data from the year 2009 to 2020. Company performance is measured by the change in turnover, profit, and share price. The analysed sections mostly show high to very high levels of difficulty. During the observation period, readability levels do not change significantly. We find that the annual reports of firms with lower performance are not harder to read and, therefore, cannot confirm the management obfuscation hypothesis. A significant influence of change in profit/loss on readability is minutely observed. Possible reasons for this observation could be characteristics of the German language, statistical outliers, the long observation period, more professional investor relations offices, and changing communication channels between companies and stakeholders. The last point, changing communication channels, also puts the obfuscation hypothesis and its application to readability up for discussion again. Implications for Central European audience: Our study shows that also Central European countries are confronted with low levels of readability in annual reports. Nevertheless, we cannot see a clear tendency towards obfuscation in corporate disclosures.
Czech name
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Czech description
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Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50204 - Business and management
Result continuities
Project
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Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace
Others
Publication year
2022
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Central European Business Review
ISSN
1805-4862
e-ISSN
1805-4862
Volume of the periodical
11
Issue of the periodical within the volume
5
Country of publishing house
CZ - CZECH REPUBLIC
Number of pages
18
Pages from-to
49-66
UT code for WoS article
000892859500003
EID of the result in the Scopus database
2-s2.0-85143854601