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Does financial statement readability alleviate the informational disadvantage of foreign investors?

Author

Listed:
  • Somya Arora
  • Yogesh Chauhan

Abstract

Purpose - This paper aims to explore whether financial statement readability overcomes the information disadvantage of foreign equity investors. Design/methodology/approach - A comprehensive data set of Indian firms listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for 2007–2019 has been used to evaluate the proposed research questions. This study uses the Panel data method to investigate the research question. Findings - The results reveal that readable financial statements attract foreign investments. The readability benefits are more noticeable for firms operating in less competitive industries and having poor earnings quality. Originality/value - This study suggests that foreign investors facing informational disadvantages prefer firms with better readability as a substitute for informational acquisition, processing and monitoring.

Suggested Citation

  • Somya Arora & Yogesh Chauhan, 2023. "Does financial statement readability alleviate the informational disadvantage of foreign investors?," Pacific Accounting Review, Emerald Group Publishing Limited, vol. 35(3), pages 432-450, March.
  • Handle: RePEc:eme:parpps:par-05-2022-0070
    DOI: 10.1108/PAR-05-2022-0070
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