Readability of Annual Reports on the Vienna Stock Exchange: A Test of Management Obfuscation Hypothesis
Identifikátory výsledku
Kód výsledku v 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>
Výsledek na webu
<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>
Alternativní jazyky
Jazyk výsledku
angličtina
Název v původním jazyce
Readability of Annual Reports on the Vienna Stock Exchange: A Test of Management Obfuscation Hypothesis
Popis výsledku v původním jazyce
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.
Název v anglickém jazyce
Readability of Annual Reports on the Vienna Stock Exchange: A Test of Management Obfuscation Hypothesis
Popis výsledku anglicky
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.
Klasifikace
Druh
J<sub>imp</sub> - Článek v periodiku v databázi Web of Science
CEP obor
—
OECD FORD obor
50204 - Business and management
Návaznosti výsledku
Projekt
—
Návaznosti
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace
Ostatní
Rok uplatnění
2022
Kód důvěrnosti údajů
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Údaje specifické pro druh výsledku
Název periodika
Central European Business Review
ISSN
1805-4862
e-ISSN
1805-4862
Svazek periodika
11
Číslo periodika v rámci svazku
5
Stát vydavatele periodika
CZ - Česká republika
Počet stran výsledku
18
Strana od-do
49-66
Kód UT WoS článku
000892859500003
EID výsledku v databázi Scopus
2-s2.0-85143854601