Evaluate the Impact of the Type of Business Strategy on the Readability of Disclosure of Financial Statements of Companies Listed on the Tehran Stock Exchange

Advances in Mathematical Finance and Applications

مقاله 11، دوره 8، شماره 2، مرداد 2023، صفحه 531-547   

نوع مقاله: Research Paper

شناسه دیجیتال (DOI): 10.22034/amfa.2022.1942713.1642

نویسندگان

Zahra Mousavi؛ Ahmad Kaabomeir^* ؛ Saeed Nasiri

Department of Accounting, Ahvaz Branch, Islamic Azad University, Ahvaz, Iran

چکیده

So far, readabilityof disclosure concepts and the behavioral features of investors have not been addressed appropriatedly in Iran despite their importance and there is not even a suitable tool to measure it in the country. Therefore, it seems necessary to conduct research in Iran to introduce the concept of disclosure readability, its measurement and the impact of business strategy on the readabilityof disclosure of financial statements. Therefore, the current paper evaluated the effect of the type of business strategy on the readability of financial statements of companies listed on the Tehran Stock Exchange. This is an applied causal (post-event) correlational paper. The statistical population of the study is all companies listed on the Tehran Stock Exchange. Using the systematic elimination sampling method, 129 companies were selected as the research sample and were surveyed in a period of 5 years from 2015 to 2019. EViews 9 and regression were used to test the research hypotheses. The results show that the type of business strategy affects the readability of financial statements of companies listed on the Tehran Stock Exchange.

کلیدواژه‌ها

Financial Reporting؛ Disclosure؛ Defensive Strategy؛ Readability؛ Financial Flexibility

مراجع

[1] Ajina, A., Danielle, S., Lakhal, F., Corporate Disclosures, Information Asymmetry and Stock-Market Liquidity in France, The Journal of Applied Business Research, 2016, 31(3), P.223-238. Doi:10.19030/jabr.v31i4.9297

[2] Asay, S., Elliott, B., Rennekamp, K., Firm performance, reporting goals and language choices in narrative disclosures, Journal of Accounting and Economics, 2018, 65(2), P.380-398. Doi: 10.1016/j.jacceco.2018.02.002

[3] Barzegar, Gh., Foladi Savadkoohi, F., Yaghoubi, S., Mehrpoyafar, N., The impact of business strategies on the disclosure of research and development activities of companies, Journal of Executive Management, 2009, 10(19), P.121-145, Doi:10.22080/jem.2019.14964.2754

[4] Barzideh, F., Javani Qalandari, M., Azimi, A., The Impact of Business Strategies on Investment Efficiency, Journal of Accounting Knowledge, 2018, 9(4), P.153-184, Doi:10.22103/jak.2018.11158.2532

[5] Bentley, K., Omer, T. C., Sharp, N. Y., Business Strategy, Financial Reporting Irregularities and Audit Effort, Contemporary Accounting Research, 2013, 30(2), P.780-817, Doi:10.2139/ssrn.1705726

[6] Bhattacharya, N., Investors’ trade size and trading responses around earnings announcements: An empirical investigation, The Accounting Review, 2001, 76(2), P. 221-244, Doi:10.2308/accr.2001.76.2.221

[7] Blanco, B., and Dhole, S., Financial Statement Comparability, Readability and Accounting Fraud, 2017, AFAANZ Conference, Working Paper, https://www.afaanz.org/openconf/2017/mo dules/request.php?module =oc_program& action=summary.php&id=4

[8] Bloomfield, J., Discussion of Annual report readability, current earnings, and earnings persistence, Journal of Accounting and Economics, 2008, 45(3), P.248-252, Doi: 10.1016/j.jacceco.2008.04.002

[9] Bloomfield, R., The Incomplete Revelation Hypothesis’ and financial reporting,Account Horizons ,2002, 16(4), P.233–243, Doi:10.2139/ssrn.312671

[10] Bonabi Ghadim, R., Waez, S.A., Asghari Zanozi, E., The effect of business strategy on the comparability of financial statements with emphasis on the role of information asymmetry in companies listed on the Tehran Stock Exchange, Financial Accounting Research, 2020, 12(1), P.39-56, Doi:10.22108/far.2020.116803.1457

[11] Brazel, J. F., Jones, K. L., and Zimbelman, M. F.,Using Nonfinancial Measures to Assess Fraud Risk,Journal of Accounting Research, 2009, 47(5), P. 1135-1166, Doi:10.1111/j.1475-679X.2009.00349.x

[12] Choia, S., Chung, C., Kima, D., Lee,J.,Market value of 10-K readability and corporate cash holdings, Economics Letters, 2021, 201(8), P.1-5, Doi:10.1016/j.econlet.2021.109796

[13] Courtis, J.,Corporate report obfuscation: artefact or phenomenon?, Br. Account. Rev,2004, 36(5), P. 291–312, Doi: 10.1016/j.bar.2004.03.005

[14] Etemadi, H., Zalqi, H., Application of logistic regression in identifying fraudulent financial reporting, Auditing Knowledge, 2013,13(51), P.145 – 163.

[15] Fazlolahi, S., Mansatra Maleki Tavana, M., Content analysis methodology with emphasis on readability techniques and determining the involvement of texts,Bi-Quarterly Research, 2010, 2(1), P.71-94, http://pajohesh.nashriyat.ir/node/27

[16] Firtel, K., Plain English: A reappraisal of the intended audience of disclosure under the securities act of 1933, Southern California Law Review, 1999, 72(12), P.851–897.

[17] Habib, A., and Hasan., M.M., Business strategies and annual report readability, Accounting and Finance, 2018, 60(15), P.2513-2547, Doi:10.1111/acfi.12380

[18] Hajiha, Z, Ranjbar Navi, R., The effect of trading strategy and stock overvaluation on the risk of falling stock prices, Financial Accounting Research, 2018, 10(2), P.45-64, Doi:10.22108/far.2018.106483.1142

[19] Hasan, M. M., Readability of narrative disclosures in 10-K reports: Does managerial ability matter? European Accounting Review, 2018, 29(1), P.147-168, Doi:10.1080/09638180.2018.1528169

[20] Hasan, M.M., Managerial Ability, Annual Report Readability and Disclosure Tone, 2017. (April 23, 2017). Available at SSRN: https://ssrn.com/abstract=2957135.

[21] Higgins, D., Omer, T.C., and Phillips, J.D., The influence of a firm’s business strategy on its tax aggressiveness, Contemporary Accounting Research, 2015, 32, P. 674–702.

[22] Ittner, C.D., Larcker, D.F., and Rajan, M.V., The choice of performance measures in annual bonus contracts, The Accounting Review, 1997, 72, P.231–255.

[23] Khani masoum abadi, z., rajab dorri, h., The Relationship between Readability of Financial Reports and Tax Aggressiveness via Simultaneous Equation System, journal of financial accounting research, 2019, 11-1(39), P.41-54.

[24] KiaYang Lima, E., Chalmers, K., Hanlon, D., The influence of business strategy on annual report readability, Journal of Accounting and Public Policy, journal homepage, 2018, 107, P.2411-2502.

 Doi: 10.1016/j.jaccpubpol.2018.01.003

[25] Kim, J., Kim, Y., Zhou, J., Languages and earnings management, Journal of Accounting and Economics, 2018, 63(2–3), P.288–306.

[26] Kuang,b Y., Lee,J.,Qin,B.,Does government report readability matter? Evidence from market reactions to AAERs, Journal of Accounting and Public Policy, 2020, 39(2), P.1-20, Doi: 10.1016/j.jaccpubpol.2019.106697

[27] Li, F., Annual report readability, current earnings, and earnings persistence, Journal of Accounting and Economics, 2008, 45(2), 3, P. 221-247, Doi: 10.1016/j.jacceco.2008.02.003

[28] Lim, E.K.Y., Chalmers, K., Hanlon, D., The influence of business strategy on annual report readability, Journal of Accounting and Public Policy, 2018, 37(1), P.65-81, Doi: 10.1016/j.jaccpubpol.2018.01.003

[29] Lo, K., Ramos, F., Rogo, R., Earnings management and annual report readability, Journal of Accounting and Economics, 2017,63(1), P.1–25, Doi: 10.1016/j.jacceco.2016.09.002

[30] Momeni, M., and faal Qayoumi, A., Statistical analyzes using SPSS. Tehran, Author Publishing, 2000.

[31] Monzur, H., Habib, M., A.,Readability of narrative disclosures, and corporate liquidity and payout policies, International Review of Financial Analysis , 2020, 68(11), P.1-15, Doi:10.1016/j.irfa.2020.101460

[32] Namazi, M., Dehghanisadi, A., and Qohestani, S., Managers' narcissism and Business strategy of companies, knowledge of accounting and management audit, 2017, 6(22), P.37-52.

[33] Nowruzi, M., Azinfar, K., Abbasi, I., Dadashi, I., Model design and evaluate the adjusting role of management ability on the relationship between financial reporting readability and agency cost, Financial Accounting Research,2020, 12(1), P.1-18, Doi:10.22108/far.2019.116175.1433

[34] Rennekamp, K., Processing fluency and investors’ reactions to disclosure readability, J. Account. Res, 2012, 50, P.1319–1354, Doi:10.1111/j.1475-679X.2012. 00460.x

[35] Rezaei Pitehnoi, Y., Safari Graili, M., Legibility of financial reporting and the possibility of fraudulent financial reporting, Journal of Financial Accounting Research, 2018, 10(4), P.43-58. Doi: 10.22108/far.2019.113858.1337

[36] Rjib, H., Saadi, S., Boubaker, S., Ding, X., Annual report readability and the cost of equity capital, Journal of Corporate Finance, 2021, 67, P.1-25, Doi: 10.1016/j.jcorpfin.2021.101902

[37] Safari Graili, M., Rezaei Pite Noei, Y., Business Strategy and Readability of Financial Reporting, Financial Accounting Quarterly, 2019, 11(42), P.130-150, Doi:10.22103/jak.2018.11261.2548

[38] Securities and Exchange Commission (SEC). 1998. A Plain English Handbook: How to Create Clear SEC Disclosure, Available at: http://www.sec.gov/pdf/handbook.pdf

[39] Securities and Exchange Commission (SEC), Interpretation: Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations, 2003, Available at: http://www.sec.gov/rules/interp/33-8350.htm.

[40] Shirazi Dehkharghani, M., Haghgoo Mehrdad, N., Investigating the Relationship between Business Strategy and Fraudulent Financial Reporting with Emphasis on the Role of Disclosure Quality, Accounting and Management Perspectives, 2018, 1(1), P.60-76, Doi: jamv.2018.1005

[41] Souza, J., Rissatti, J.C., Rover, S., Borba, J.S., The linguistic complexities of narrative accounting disclosure on financial statements: An analysis based on readability characteristics, Research in International Business and Finance, 2019, 48, P.59-74.

[42] TongTan, H., YingWang, E., Zhou, B., How Does Readability Influence Investors’Judgments? Consistency of Benchmark Performance Matters, The Accounting Review, 2015, 90(1), P.371–393, Doi:10.2139/ssrn.1888970

[43] Zhang, Y., Wiersema, M.F., Stock market reaction to CEO certification: The signaling role of CEO background, Strategic Management Journal, 2009, 2(3), P. 693-710, Doi:10.1002/smj.772

[44] Zanjirdar, M. Overview of Portfolio Optimization Models. Advances in Mathematical Finance and Applications, 2020, 5(4), P. 419-435. Doi: 10.22034/amfa.2020.674941

[45] Izadikhah, M. DEA Approaches for Financial Evaluation - A Literature Review, Advances in Mathematical Finance and Applications, 2022, 7(1), P. 1-36, Doi: 10.22034/amfa.2021.1942092.1639

[46] Salehi, A., Mohammadi, S., Afshari, M., Impact of Institutional Ownership and Board Independence on the Relationship Between Excess Free Cash Flow and Earnings Management. Advances in Mathematical Finance and Applications, 2017, 2(3), P. 91-105. Doi: 10.22034/amfa.2017.533104

[47] Parsa, B., Sarraf, F., Financial Statement Comparability and the Expected Crash Risk of Stock Prices. Advances in Mathematical Finance and Applications, 2018, 3(3), P. 77-93. Doi: 10.22034/amfa.2018.544951

[48] Jokar, H., Shamsaddini, K., Daneshi, V., Investigating the Effect of Investors' Behavior and Management on the Stock Returns: Evidence from Iran. Advances in Mathematical Finance and Applications, 2018, 3(3), P. 41-52. Doi: 10.22034/amfa.2018.544948