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Business strategies and annual report readability

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  • Ahsan Habib
  • Mostafa Monzur Hasan

Abstract

This study investigates the association between firm‐level business strategy and the readability of narrative disclosures in annual reports. As business strategy affects the information environment and financial performance of firms, we expect the readability of narrative disclosures to vary with the particular business strategy that a firm pursues. In accord with this expectation, we find that firms with prospector‐type business strategies produce less readable narratives, while those with defender‐type business strategies produce more readable narratives. We also document that the association between strategy and readability is partially mediated by organisational performance, although the mediation effect is rather modest. These findings are robust when subjected to a series of sensitivity tests.

Suggested Citation

  • Ahsan Habib & Mostafa Monzur Hasan, 2020. "Business strategies and annual report readability," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(3), pages 2513-2547, September.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:3:p:2513-2547
    DOI: 10.1111/acfi.12380
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    References listed on IDEAS

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    Cited by:

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    2. Jia, Jing & Li, Zhongtian, 2022. "Risk management committees and readability of risk management disclosure," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(3).
    3. Efstathios Magerakis & Ahsan Habib, 2022. "Environmental uncertainty and corporate cash holdings: The moderating role of CEO ability," International Review of Finance, International Review of Finance Ltd., vol. 22(3), pages 402-432, September.

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