Readability of Corporate Annual Reports of Top 100 Malaysian Companies

Authors

  • Rosli Mohamad Faculty of Accountancy, Universiti Utara Malaysia, Malaysia
  • Azhar Abdul Rahman Faculty of Accountancy Universiti Utara Malaysia, Malaysia

DOI:

https://doi.org/10.32890/mmj2006.10.3

Keywords:

Corporate Communication, Annual Reports, Chairman’s statements, Flesch Readability Formula, Malaysian Companies

Abstract

The main purpose of this paper is to compare the readability of two narrative sections in Malaysian corporate annual reports. Further more the authors investigate whether readability of one section reflects the readability of another section. On top of that, consistency of the readability level across companies is also reviewed. The study assess the readability of the chairman’s statement and notes to the accounts of top 100 Malaysian corporations using Flesch readability formula. Overall results indicated consistent finding with prior studies with which the readability of both narratives is considered as very difficult to read. Specifically, the findings revealed that the management does not present the chairman’s statement in a more readable style despite greater flexibility offered in its presentation than notes to the accounts. Further test also confirmed that a readable chairman’s statement is not necessarily followed by readable notes to the accounts and vice versa. Finally, the study reported that readability of notes to the accounts is more consistent among companies than the chairman’s statement. It is therefore recommended that the management should consider presenting the chairman’s statement in a plain English to ensure that investors accurately receive the conveyed message.

 

Downloads

Download data is not yet available.

References

Anderson, R. H. (1998). Regulating corporate annual reports in Australia. Business and Economic History, 27(2), 522–34. http://mmj.uum.edu.my

Azhar, A.R. (1993). Kajian membujur tentang kebolehbacaan penyata/ulasan pengerusi dalam laporan korporat sebuah syarikat di Malaysia (trans: A longitudinal study on the readability of the chairman’s statements in corporate report of a company in Malaysia), Kedah: Jawatankuasa Penerbitan Universiti Utara Malaysia (UUM).

Barnett, A. & Leoffler, K. (1979). Readability of accounting and auditing messages. The Journal of Business Communication. 16(3), 49–59.

Chiu, P. (1996). Trusting the figures: Investors want more information. Australian Accountant, 66(7), 44–46.

Clatworthy, M. & Jones, J. M. (2001). The effect of thematic structure on the variability of annual reports readability. Accounting, Auditing & Accountability Journal, 14(3), 311-326. Courtis ((1986). An investigation into annual reports readability and corporate risk –return relationship. Accounting and Business Research, (Autumn), 285–294.

Courtis, J. K. (1987). Fry, Smog, Lig and Rix: Insinuations about corporate business communication. The Journal of Business Communication, 24(2), 19-27.

Courtis, J. K. (1995). Readability of annual reports: Western versus Asian evidence. Accounting, Auditing and Accountability Journal, 8(2), 4-17.

Courtis, J. K. (1998). Annual report readability variability: Test of the obfuscation hypothesis. Accounting, Auditing and Accountability Journal, 11(4), 459–72.

Courtis, J. K. & Salleh, H. (2002). Reading ease of bilingual annual reports. The Journal of Business Communication, 39(3), 394–414.

Courtis, J. K. (2004). Corporate report obfuscation: artefact or phenomenon? The British Accounting Review, 36, 291–312

Dale, E. & Chall, J.S. (1948). A formula for predicting readability. Educational Research Bulletin, 27, 11-20 and 37-54.

Dreyer, L. G. (1984). Readability and responsibility. Journal of Reading. (January), 334–338.

Flesch, R. F. (1960). How to write, speak, and think effectively. New York: Harper and Row.

Gilliland, J., (1972), Readability. London: University of London Press.

Healy, P. (1977). Can you understand the footnotes to financial statements? Accountant’s Journal, 56, 219 –22.

Irwin, J.W. & Davis, C.A. (1980). Assessing readability: The checklist approach. Journal of Reading, (November), 124–130.

Jones, M. J. (1988a). Annual corporate reports: A waste of time and money? Management Accounting, 66(2), 40–41.

Jones, M. J. (1988b). A longitudinal study of the readability of the chairman’s narratives in the corporate reports of a UK Company. Accounting and Business Research, 18(72), 297-305.

Jones, M. (1994). Readability of accounting narratives. Management Accounting. 72(4), 28.

Klare, G. R. (1974/1975). Assessing readability. Reading Research Quarterly, 10(1), 63–102. Malaysian Management Journal 10 (1 & 2), 33-47 (2006)

Klare, G. R. (1985). How to write readable English. London: Hutchinson & Co Ltd.

Kohut, G. F., & Segars, A. H. (1992). The president’s letter to stockholders: An examination of corporate communication strategy. The Journal of Business Communication. 29(1): 7 - http://mmj.uum.edu.my

Lesikar, R. V. (1968). Report writing for business (Revised edition), Illinois: Irwin.

Lewis, N. R.; Parker, L. D.; Pound, G. D. & Sutcliffe, P. (1986). Accounting report readability: The use of readability techniques. Accounting and Business Research, (Summer): 199–213.

McConnell, C. R. (1982). Readability formula as applied to college economics textbooks. Journal of Reading, (October), 14–17.

Pashalian, S. & Crissy, W, J. (1952). Corporate annual reports are difficult, dull reading, human interest value low, survey shows. Journal of Accountancy, (August): 215–219.

Rezaee, Z., & Porter, G. L. (1993). Can the annual report be improved? Review of Business, 15(1), 38–41.

Rogers, K. R. & Grant, J. (1997). Content analysis of information cited in reports of sell-side financial analysts. Journal of Financial Statement Analysis, 3(1), p. 17-30.

Schroeder, N. & Gibson, C. (1990). Readability of management’s discussion and analysis. Accounting Horizon, 4 (4), 78-87.

Schroeder, N. & Gibson, C. (1992). Are summary annual reports successful? Accounting Horizon, 6 (2), 28-37.

Smith, D. & Richardson, G. (1999). The readability of Australia’s taxation laws and supplementary materials: An empirical investigation. Fiscal Studies, 20(3), p. 321-49.

Smith, J. E. & Smith, N. P. (1971). Readability: A measure of the performance of the communication function of financial reporting. The Accounting review, July, 552–561.

Smith, M. & Taffler, R. (1992a). Readability and understandability: Different measures of the textual complexity of accounting narrative. Accounting, Auditing and Accountability Journal, 5(4), 85–98.

Smith, M. & Taffler, R. (1992b). Chairman’s statements and corporate financial performance. Accounting and Finance, 32(2),75–90.

Soper, F. J. & Dolphin, R. J. (1964). Readability and corporate annual reports. The Accounting Review, (April): 358–362. Subramaniam, R., Insley, R.G., & Blackwell, R.

D. (1993). Performance and readability: A comparison of annual reports. The Journal of Business Communication, 30 (1), 49-61.

Worthington, J. S. (1979). More understanding with simpler footnotes: One footnote is not worth a thousand words. CA Magazine, 112, 44–47. Malaysian Management Journal 10 (1 & 2), 33-47 (2006)

Downloads

Published

01-12-2006

Issue

Vol. 10 No. 1&2 (2006): Malaysian Management Journal (MMJ) Vol. 10 No.1&2 June/December 2006

Section

Articles

How to Cite

Mohamad, R., & Abdul Rahman, A. (2006). Readability of Corporate Annual Reports of Top 100 Malaysian Companies. Malaysian Management Journal, 10(1&2), 33-47. https://doi.org/10.32890/mmj2006.10.3

Research impact

Harvested 2026-09-07
0 citations recorded so far

Counts differ between services because each indexes a different body of literature. None of them is the whole picture.

Identifiers DOI 10.32890/mmj2006.10.3