The readability and narrative tone of risk and risk management disclosures for South African listed companies

Abstract

PurposeRisk information provides information to enable stakeholders to make informed decisions about a company. Corporate communications should be readable and unbiased so as not to hamper disclosure usefulness. This study assesses whether risk disclosures in the integrated reports are readable and unbiased.Design/methodology/approachThe readability and narrative tone of South African listed companies' risk and risk management disclosures as disclosed in their integrated reports are analysed using automated software for the Top 40 JSE listed companies from 2015 to 2019.FindingsThe results show that risk and risk management disclosures are unreadable and lack any improvement in readability during the period. Additionally, these disclosures are biased toward narrative tones signalling communality and certainty.Originality/valueThe study adds to the literature on the readability of corporate reports, by focussing on the readability and narrative tone of risk and risk management disclosures during a period of increased scrutiny over the content of such disclosures. Also, by analysing risk disclosure and risk management disclosure separately, and by performing trend analysis to determine whether requirement changes related to content (specifically King IV) affect readability and narrative tones.