Readability of annual reports of firms listed in Egyptian Exchange

Abstract

The research aims to examine two fold objectives. First, it measures the readability of chairman's letter and social responsibility textual report throughout financial and non-financial firms in Egypt. Second, it describes the relationship among extant techniques of readability in accounting literature. The research utilizes exclusively five techniques in order to analyze narrative disclosure regarding prior paragraphs of annual reports. Unlike prior literature, the research analyzes the textual content using comprehensive set of measures which are Flesch reading ease, Gunning fog, Flesch-Kincaid grade, SMOG grade, Dale-Chall score. The results reveal that there is no significant difference between financial and non-financial Egyptian firms concerning the theme of readability of annual reports. Whereas the relationship between Flesch reading ease and other extant measures of readability is negative and significant. The research provides practical implications to shareholders, stakeholders, investors, financial analysts and other interested parties as they will be better able to detect the managerial obfuscation and understand easily the content of narrative annual reports.