Are longer annual reports less readable? Evidence from foreign firms listed on the United States Stock Exchanges

Abstract

This study examines whether longer annual reports are less readable. Using the sample of 20-F forms published by foreign firms listed on the United States Stock Exchanges, we find a significantly negative association between the length of annual reports and readability. This result suggests that longer annual reports are not less readable. The change in writing styles with shorter sentences, which is better complied with regulations of the US Securities and Exchange Commission (SEC) on disclosure, is considered the main reason for longer but more readable annual reports. We also raise awareness when employing the length of annual reports as the proxy of readability in research on the complexity of annual reports.