Readability of narrative disclosures in 10-K reports

does managerial ability matter?

Mostafa Monzur Hasan*

*Corresponding author for this work

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This study examines the association between managerial ability and the readability of narrative disclosures in 10-K reports. Using a large US sample from 1994 to 2015, we find that managerial ability is significantly positively associated with the readability of narrative disclosures in 10-K reports. We also find that this association is more pronounced for firms with high levels of profitability. In addition, firms’ financial performance mediates the association between managerial ability and the readability of 10-K reports. Further analysis shows that the association was more pronounced before the implementation of the plain English disclosure rules. These results are robust to alternative specifications of managerial ability, 10-K report readability, and the endogeneity concern. Overall, findings from this study suggest that managerial ability matters for improving the readability of corporate disclosures.

Original languageEnglish
Pages (from-to)147-168
Number of pages22
JournalEuropean Accounting Review
Volume29
Issue number1
Early online date27 Sep 2018
DOIs
Publication statusPublished - 1 Jan 2020
Externally publishedYes

Keywords

  • 10-K reports
  • Managerial ability
  • Readability

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