Readability of Annual Reports and the Agency Problem of Corporation in the Context of Pakistan

Muneeb Ahmad,Zhou Maochun

doi:10.35935/tax/25.2713

Abstract

This study is conducted to investigate the issue of readability of the annual report, which caused the conflict between the shareholders and the management. Annual reports are the integral source of information for the shareholders regarding their investment. To investigate the importance of the readability, we took the data of 21 non-financial companies which are in the KSE-30 index of Pakistan for the 10 years (2008-2017). The findings of our results depict that those firms whose annual report is more readable as compare to other facing low problem of the conflict between the shareholders and the management. Further results of this study indicate that under the better quality measures, relevent audit increase the readability of the annual report which reduce the agency cost.

Highlights

Readability is the main characteristics of any message which help out the readers to grabs the actual sense of information which the sender wants to deliver
Maximum researches are conducted in English speaking countries, but in Pakistan native language is in Urdu, but companies financial reports are in English
Further the results indicate that under the better quality of Audit of the corporation accounts enhance the readability of the annual report, which helps the shareholders for extracting the specific information more for their investment

Summary

Introduction

Readability is the main characteristics of any message which help out the readers to grabs the actual sense of information which the sender wants to deliver. Maximum researches are conducted in English speaking countries, but in Pakistan native language is in Urdu, but companies financial reports are in English. This issue generates the more readability issue from a lengthy financial reports. For the effectiveness of the financial reports concerning empowering the outsider shareholders are giving them useful information regarding the financial performance of the joint stock company. In terms, they can get to know the management aptitude and the performance of the management. The time frame of the study lies from 2008 to 2017

Literature Review

Research Methodology

Descriptive Statistics

24 Table 12

Conclusion