The effect of thematic structure on the variability of annual report readability

Abstract

The readability of annual reports has been the focus of extensive prior research. However, the extent of readability variability has only recently received specific attention. In response to a perceived need for further research into this area, an analysis of 60 UK chairman’s statements was conducted in order to test for possible determinants of readability variability. Results show the introduction to the chairman’s statement is systematically easier to read than other parts of the chairman’s statement. No evidence was found to support prior research that, rather than present accounting narratives objectively, managers use readability variability to emphasise good news and obfuscate bad news. The thematic structures within the chairman’s statement were investigated to explore whether they were responsible for systematic patterns in the variability of annual report readability. Findings indicate that thematic structure of the chairman’s statement is indeed a key driver of the variability of annual report readability.

Citation

Clatworthy, M. and Jones, M.J. (2001), "The effect of thematic structure on the variability of annual report readability", Accounting, Auditing & Accountability Journal, Vol. 14 No. 3, pp. 311-326. https://doi.org/10.1108/09513570110399890