Soper & Dolphin (1964)Soper, F., & Dolphin Jr., R. (1964). Readability and corporate annual reports. The Accounting Review, 39(2), 358-362. https://www.jstor.org/stable/243526 https://www.jstor.org/stable/243526...
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Improved readability of accounting reports. |
Flesch |
1) 25 firms from 1948 and 1961. 2) 42 people from four different financial literacy groups. |
1) A statistically significant decrease in the readability of accounting information. 2) There is a relationship between understandability and readability. |
Worthington (1977)Worthington, J. S. (1977). The readability of footnotes to financial statements and how to improve them. Journal of Reading, 20(6), 469-478. https://www.jstor.org/stable/40010895 https://www.jstor.org/stable/40010895...
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The relationship between the readability index and the educational level of shareholders. |
Dale-Chall |
96 companies from the 1974 Fortune list. |
36% of shareholders would have problems understanding the notes to the financial statements of 88% of companies. |
Lewis et al. (1986)Lewis, N. R., Parker, L. D., Pound, G. D., & Sutcliffe, P. (1986). Accounting Report Readability: The Use of Readability Techniques. Accounting and Business Research, 16(63), 199-213. http://dx.doi.org/10.1080/00014788.1986.9729318. http://dx.doi.org/10.1080/00014788.1986....
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The similarities in the internal structure of five different readability indexes. |
Dale-Chall Flesch Fog Kwolek Lix |
9 firms from 1977 to 1980. |
Using any of the indexes studied, financial reports to employees, which are supposed to be easily read, presented a score that classified them as "difficult to read" and showed no improvement over time. |
Smith & Taffler (1992)Smith, M., & Taffler, R. (1992). Readability and understandability: Different measures of the textual complexity of accounting narrative. Accounting, Auditing & Accountability Journal, 5(4), 84-98. http://dx.doi.org/10.1108/09513579210019549. http://dx.doi.org/10.1108/09513579210019...
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The differences between readability and understandability. |
Flesch Lix |
Experiment with 18 subjects. |
For more sophisticated users, such as accountants, Flesch and understandability scores were much closer to understandability than those of a less sophisticated group, such as undergraduate students. |
Rennekamp (2012)Rennekamp, K. (2012). Processing fluency and investors’ reactions to disclosure readability. Journal of Accounting Research, 50(5), 1319-1354. http://dx.doi.org/10.1111/j.1475-679X.2012.00460.x. http://dx.doi.org/10.1111/j.1475-679X.20...
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Readability and investors' reaction. |
No specific readability index used. |
Experiment with 234 subjects. |
More readable press releases elicited stronger reactions from small investors, indicating that increased readability increased investors' perceptions of reliability. |
Lo et al. (2017)Lo, K., Ramos, F., & Rogo, R. (2017). Earnings management and annual report readability. Journal of Accounting and Economics, 63(1), 1-25. http://dx.doi.org/10.1016/j.jacceco.2016.09.002. http://dx.doi.org/10.1016/j.jacceco.2016...
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Whether managers use complex MD&A disclosures to hide information from investors. |
Fog |
26,967 firm-years observations from 2000 to 2012. |
Managers use financial disclosure to manipulate investors' understanding of firm value. |
Telles & Salotti (2020)Telles, S., & Salotti, B. (2020). Intelligibility VS Readability: Understandanility measures of financial information. Revista Universo Contábil, 16(2), 110. http://dx.doi.org/10.4270/ruc.2020209. http://dx.doi.org/10.4270/ruc.2020209...
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Comparisons of readability and intelligibility metrics for notes in English and in Portuguese. |
Flesch index Intelligibility metrics |
176 firm-year observations from firms in Brazil from 2012 to 2015. |
Readability and intelligibility metrics do not measure the same aspects of a text. Additionally, native language texts were found to be more readable and intelligible than non-native language texts. |
Sun et al. (2022)Sun, Y., Wang, J., & Huang, K. (2022). Does IFRS and GRI adoption impact the understandability of corporate reports by Chinese listed companies? Accounting and Finance, 62(2), 2879-2904. http://dx.doi.org/10.1111/acfi.12908. http://dx.doi.org/10.1111/acfi.12908...
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The impact of IFRS and GRI adoption on the readability and conciseness of corporate reports. |
Fog Number of pages |
Top 100 Chinese A-share listed companies. |
IFRS adoption had a positive impact on readability and conciseness, while GRI adoption had a negative impact on both variables. |