Readability of narrative disclosures, and corporate liquidity and payout policies

Mostafa Monzur Hasan*, Ahsan Habib

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

In this paper, we examine the relation between the readability of narrative disclosures in 10-K reports, and corporate liquidity and payout policies. We find that firms with less readable disclosures hold significantly more cash. We also find that this relationship is stronger for firms with weak corporate governance, and with higher financing constraints and refinancing risks. Further analysis also shows that firms with less readable disclosures pay fewer cash dividends and repurchase less stock. Our findings are robust to different estimation methods, and to alternative specifications of key variables. The findings from this study contribute to the emerging research that stresses the importance of 10-K report readability in protecting shareholder wealth.

Original languageEnglish
Article number101460
Pages (from-to)1-15
Number of pages15
JournalInternational Review of Financial Analysis
Volume68
DOIs
Publication statusPublished - 1 Mar 2020

Keywords

  • Cash holdings
  • Payout policy
  • Readability of narrative disclosures

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