IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v64y2023ics027553192200229x.html
   My bibliography  Save this article

Asset redeployability and readability of annual report

Author

Listed:
  • Sun, Li

Abstract

We examine the impact of holding more redeployable assets on the readability of annual reports. Building on prior research, we develop two competing hypotheses. Using a large panel sample of 67,022 firm-year observations for the period of 1993–2018, we find that the annual reports of firms with more redeployable assets are easier to read and understand. We further obtain consistent results after performing a battery of robustness and endogeneity checks. Overall, our study joins the debate on whether holding more redeployable assets is beneficial or detrimental to a company and contributes to a more comprehensive understanding of asset redeployability.

Suggested Citation

  • Sun, Li, 2023. "Asset redeployability and readability of annual report," Research in International Business and Finance, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:riibaf:v:64:y:2023:i:c:s027553192200229x
    DOI: 10.1016/j.ribaf.2022.101843
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S027553192200229X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2022.101843?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. repec:bla:jfinan:v:43:y:1988:i:3:p:567-91 is not listed on IDEAS
    2. Chen, Haosi & Maslar, David A. & Serfling, Matthew, 2020. "Asset redeployability and the choice between bank debt and public debt," Journal of Corporate Finance, Elsevier, vol. 64(C).
    3. Lo, Kin & Ramos, Felipe & Rogo, Rafael, 2017. "Earnings management and annual report readability," Journal of Accounting and Economics, Elsevier, vol. 63(1), pages 1-25.
    4. Bonsall, Samuel B. & Leone, Andrew J. & Miller, Brian P. & Rennekamp, Kristina, 2017. "A plain English measure of financial reporting readability," Journal of Accounting and Economics, Elsevier, vol. 63(2), pages 329-357.
    5. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.
    6. Tim Loughran & Bill Mcdonald, 2014. "Measuring Readability in Financial Disclosures," Journal of Finance, American Finance Association, vol. 69(4), pages 1643-1671, August.
    7. Don Herrmann & Tatsuo Inoue & Wayne B. Thomas, 2003. "The Sale of Assets to Manage Earnings in Japan," Journal of Accounting Research, Wiley Blackwell, vol. 41(1), pages 89-108, March.
    8. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    9. Caballero, Ricardo J, 1991. "On the Sign of the Investment-Uncertainty Relationship," American Economic Review, American Economic Association, vol. 81(1), pages 279-288, March.
    10. Gus De Franco & Ole†Kristian Hope & Dushyantkumar Vyas & Yibin Zhou, 2015. "Analyst Report Readability," Contemporary Accounting Research, John Wiley & Sons, vol. 32(1), pages 76-104, March.
    11. Drago, Carlo & Ginesti, Gianluca & Pongelli, Claudia & Sciascia, Salvatore, 2018. "Reporting strategies: What makes family firms beat around the bush? Family-related antecedents of annual report readability," Journal of Family Business Strategy, Elsevier, vol. 9(2), pages 142-150.
    12. Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," The Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.
    13. repec:eme:maj000:maj-09-2018-2020 is not listed on IDEAS
    14. Le Wang & Xiaoyan Chen & Xing Li & Gaoliang Tian, 2021. "MD&A readability, auditor characteristics, and audit fees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5025-5050, December.
    15. Li, Feng, 2008. "Annual report readability, current earnings, and earnings persistence," Journal of Accounting and Economics, Elsevier, vol. 45(2-3), pages 221-247, August.
    16. Guay, Wayne & Samuels, Delphine & Taylor, Daniel, 2016. "Guiding through the Fog: Financial statement complexity and voluntary disclosure," Journal of Accounting and Economics, Elsevier, vol. 62(2), pages 234-269.
    17. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
    18. Brett S. Kawada & Jeff Jundong Wang, 2019. "Annual report readability subsequent to going-concern opinions," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 35(1), pages 24-42, December.
    19. Rong, Yuen & Tian, Cunzhi & Li, Lifang & Zheng, Xinwei, 2020. "Does asset redeployability affect corporate investment and equity value?," International Review of Economics & Finance, Elsevier, vol. 70(C), pages 479-492.
    20. Peter Demerjian & Baruch Lev & Sarah McVay, 2012. "Quantifying Managerial Ability: A New Measure and Validity Tests," Management Science, INFORMS, vol. 58(7), pages 1229-1248, July.
    21. Mostafa Monzur Hasan & Ahsan Habib & Nurul Alam, 2021. "Asset Redeployability and Corporate Tax Avoidance," Abacus, Accounting Foundation, University of Sydney, vol. 57(2), pages 183-219, June.
    22. Bidisha Chakrabarty & Ananth Seetharaman & Zane Swanson & Xu (Frank) Wang, 2018. "Management Risk Incentives and the Readability of Corporate Disclosures," Financial Management, Financial Management Association International, vol. 47(3), pages 583-616, September.
    23. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," The Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
    24. Rjiba, Hatem & Saadi, Samir & Boubaker, Sabri & Ding, Xiaoya (Sara), 2021. "Annual report readability and the cost of equity capital," Journal of Corporate Finance, Elsevier, vol. 67(C).
    25. Lawrence, Alastair, 2013. "Individual investors and financial disclosure," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 130-147.
    26. Ortiz-Molina, Hernán & Phillips, Gordon M., 2014. "Real Asset Illiquidity and the Cost of Capital," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(1), pages 1-32, February.
    27. Ertugrul, Mine & Lei, Jin & Qiu, Jiaping & Wan, Chi, 2017. "Annual Report Readability, Tone Ambiguity, and the Cost of Borrowing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(2), pages 811-836, April.
    28. Alessandro Gavazza, 2011. "The Role of Trading Frictions in Real Asset Markets," American Economic Review, American Economic Association, vol. 101(4), pages 1106-1143, June.
    29. Samuel B. Bonsall & Brian P. Miller, 2017. "The impact of narrative disclosure readability on bond ratings and the cost of debt," Review of Accounting Studies, Springer, vol. 22(2), pages 608-643, June.
    30. Hyunseob Kim & Howard Kung, 2017. "The Asset Redeployability Channel: How Uncertainty Affects Corporate Investment," The Review of Financial Studies, Society for Financial Studies, vol. 30(1), pages 245-280.
    31. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    32. Zahn Bozanic & Maya Thevenot, 2015. "Qualitative Disclosure and Changes in Sell†Side Financial Analysts' Information Environment," Contemporary Accounting Research, John Wiley & Sons, vol. 32(4), pages 1595-1616, December.
    33. Andrew M. Bauer & Junxiong Fang & Jeffrey Pittman & Yinqi Zhang & Yuping Zhao, 2020. "How Aggressive Tax Planning Facilitates the Diversion of Corporate Resources: Evidence from Path Analysis†," Contemporary Accounting Research, John Wiley & Sons, vol. 37(3), pages 1882-1913, September.
    34. Anand Jha, 2019. "Financial Reports and Social Capital," Journal of Business Ethics, Springer, vol. 155(2), pages 567-596, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yao, Yanzhen & Wei, Lu & Jing, Haozhe & Chen, Meiqi & Li, Zhan, 2024. "The impact of readability of risk disclosures in bond prospectuses on credit risk premium," Research in International Business and Finance, Elsevier, vol. 70(PA).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Akhilesh Bajaj & Lori N. K. Leonard & Li Sun & Zhenze Xing, 2023. "Corporate social responsibility and annual report reading difficulty," Review of Quantitative Finance and Accounting, Springer, vol. 60(4), pages 1393-1428, May.
    2. Sun, Li & Johnson, Grace & Bradley, Wray, 2022. "CEO power and annual report reading difficulty," Journal of Contemporary Accounting and Economics, Elsevier, vol. 18(2).
    3. Muhammad Nadeem, 2022. "Board Gender Diversity and Managerial Obfuscation: Evidence from the Readability of Narrative Disclosure in 10-K Reports," Journal of Business Ethics, Springer, vol. 179(1), pages 153-177, August.
    4. Brid Murphy & Li Sun, 2023. "Asset redeployability and employee performance," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(2), pages 185-199, June.
    5. Hasan, Mostafa Monzur & Habib, Ahsan, 2020. "Readability of narrative disclosures, and corporate liquidity and payout policies," International Review of Financial Analysis, Elsevier, vol. 68(C).
    6. Kalelkar, Rachana & Xu, Hongkang & Nguyen, Duong & Chen, Zheng, 2024. "Generalist CEOs and the readability of the 10-K report," Advances in accounting, Elsevier, vol. 65(C).
    7. 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.
    8. Ling Tuo & Yu (Tony) Zhang & Zhenfeng Liu & Ruixue Du, 2019. "Business Education of CEO-CFO and Annual Report Readability," Review of Economics & Finance, Better Advances Press, Canada, vol. 17, pages 16-34, August.
    9. Soliman, Marwa & Ben-Amar, Walid, 2022. "Corporate social responsibility orientation and textual features of financial disclosures," International Review of Financial Analysis, Elsevier, vol. 84(C).
    10. Minxing Sun & Weike Xu, 2024. "Short selling and readability in financial disclosures: A controlled experiment," The Financial Review, Eastern Finance Association, vol. 59(2), pages 265-292, May.
    11. Rjiba, Hatem & Saadi, Samir & Boubaker, Sabri & Ding, Xiaoya (Sara), 2021. "Annual report readability and the cost of equity capital," Journal of Corporate Finance, Elsevier, vol. 67(C).
    12. Mousa, Gehan A. & Elamir, Elsayed A.H. & Hussainey, Khaled, 2022. "The effect of annual report narratives on the cost of capital in the Middle East and North Africa: A machine learning approach," Research in International Business and Finance, Elsevier, vol. 62(C).
    13. Drago, Carlo & Ginesti, Gianluca & Pongelli, Claudia & Sciascia, Salvatore, 2018. "Reporting strategies: What makes family firms beat around the bush? Family-related antecedents of annual report readability," Journal of Family Business Strategy, Elsevier, vol. 9(2), pages 142-150.
    14. Chen, Chen & Hanlon, Dean & Khedmati, Mehdi & Wake, James, 2023. "Annual report readability and equity mispricing," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(3).
    15. Ouyang, Puman & Zhong, Ligang, 2023. "Asset redeployability and dividend payout policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 91-105.
    16. de Souza, João Antônio Salvador & Rissatti, Jean Carlo & Rover, Suliani & Borba, José Alonso, 2019. "The linguistic complexities of narrative accounting disclosure on financial statements: An analysis based on readability characteristics," Research in International Business and Finance, Elsevier, vol. 48(C), pages 59-74.
    17. Sang Jun Cho & Changhwan Choi & Chune Young Chung, 2024. "Firm information and risk: Evidence from the role of 10‐K report readability," Bulletin of Economic Research, Wiley Blackwell, vol. 76(2), pages 488-507, April.
    18. Leye Li & Louise Yi Lu & Yi Wang & Yangxin Yu, 2023. "Workforce diversity and financial statement readability," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1599-1631, April.
    19. Bonsall, Samuel B. & Leone, Andrew J. & Miller, Brian P. & Rennekamp, Kristina, 2017. "A plain English measure of financial reporting readability," Journal of Accounting and Economics, Elsevier, vol. 63(2), pages 329-357.
    20. Humphery-Jenner, Mark & Liu, Yun & Nanda, Vikram & Silveri, Sabatino & Sun, Minxing, 2024. "Of fogs and bogs: Does litigation risk make financial reports less readable?," Journal of Banking & Finance, Elsevier, vol. 163(C).

    More about this item

    Keywords

    Asset redeployability; Annual reports readability; Reading difficulty;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:64:y:2023:i:c:s027553192200229x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.