Being alert to the contingency: how environmental turbulence impacts annual report readability

ABSTRACT

This study examines the association between environmental turbulence and annual report readability. We argue that companies operating in highly turbulent environments may exhibit lower annual report readability due to the industry’s increased environmental uncertainty. Using a sample of US firms from 1993 to 2019, we find that industry technological and market turbulence are negatively related to annual report readability. This study demonstrates the importance of considering environmental turbulence in understanding annual report readability.

KEYWORDS:

• Annual report readability
• environmental contingency
• technological turbulence
• market turbulence

JEL CLASSIFICATION:

• M14
• M10

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The annual report readability data is available at https://host.kelley.iu.edu/bpm/activities/bogindex.html.

² The sample size is reduced to 59,623 due to missing values in Bog Index (t + 1).

³ We obtain 10-k file size data from https://sraf.nd.edu/sec-edgar-data/lm_10x_summaries/.

Additional information

Funding

The author(s) reported there is no funding associated with the work featured in this article.