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CEO power and annual report reading difficulty

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  • Sun, Li
  • Johnson, Grace
  • Bradley, Wray

Abstract

We examine the impact of CEO power on reading difficulty of corporate annual reports. We find that CEO power is positively related to reading difficulty, implying that annual reports of corporations with powerful CEOs are difficult to read and understand. More importantly, we find that the relation between CEO power and reading difficulty is moderated by earnings performance or corporate governance. Additional findings suggest that this relation becomes stronger for firms with lower financial reporting quality or for CEOs with shorter tenure. Our study not only joins the debate on the consequences of powerful CEOs but also uncovers several factors that moderate the relation between CEO power and annual report reading difficulty.

Suggested Citation

  • Sun, Li & Johnson, Grace & Bradley, Wray, 2022. "CEO power and annual report reading difficulty," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(2).
    • Handle: RePEc:eee:jocaae:v:18:y:2022:i:2:s1815566922000108
    DOI: 10.1016/j.jcae.2022.100315
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    2. Zhengxin Zhang & Bing Xu & Piao Li, 2023. "What affects the quality of sustainability report texts? Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(3), pages 1440-1456, May.

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    More about this item

    Keywords

    CEO power; Annual report readability; Reading difficulty; Earnings performance; Corporate governance; Financial reporting quality; CEO tenure;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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