The textual complexity of annual report narratives: a comparison of high-and low-performance companies
journal contribution
posted on 2023-05-17, 01:49authored byHrasky, S, Mason, CJ, Wills, DI
Regulators world-wide haveplacedincreasing emphasis on narrativedisclosures in annualreportsas a means of informing shareholders about the position and prospects of their company. However, such disclosures have the potential to be strategically manipulated to influence the levelof complexity that confronts the reader. This studyfocuses onthe assessment of textualcomplexity using readability formulae. The potential and limitations of the formulae are explained and an empirical analysis conducted to assess differences in the textual complexity of the chairperson's annual report letter in a sample of Australian companies that have performed well and those that have performed badly. The resultsindicatethat the chairpersons' lettersof the poorperformers are significantly more textually complex than those of the high performance group.