Articlebronze2019

Chinese annual report readability: measurement and test

43 citations0/0 files storedChina Journal of Accounting Studies

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Auditing, Earnings Management, Governance Text Readability and Simplification Financial Reporting and XBRL

Abstract

Among existing researches, readability is an important research direction as a text feature of annual reports. But almost all relevant studies are based on English. In fact, readability in Chinese environment may be a problem worth studying from the perspective of motive and consequence. Accordingly, based on the analysis of the readability indexes of Chinese and English annual reports, this paper constructs three readability indexes and conducts empirical tests. Results show the average word number of each clause, the proportion of adverbs and conjunctions in each sentence, and the arithmetic mean of them are probably a reasonable set of measures. As measures aforementioned, they better meet theoretical expectation and are consistent with relevant research results. Further examinations of other text features found that length of text and count of numbers and tables may not be good measures. Work in this paper provide some basic reference for subsequent researches.

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References

1968An Empirical Evaluation of Accounting Income Numbers 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences 2012Detecting Earnings Management 2008Annual report readability, current earnings, and earnings persistence 2003Corporate governance and voluntary disclosure 2012Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure 1989An analysis of intertemporal and cross-sectional determinants of earnings response coefficients 1968The Technique of Clear Writing.

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