Determinants of Readability of Financial Reports of U.S.-Listed Asian Companies

  • Gaurav Kumar University of Arkansas at Little Rock


In this paper, I investigate the impact of secrecy, ownership dispersion and profitability on the readability of annual reports of U.S.–listed Asian companies. This is perhaps the first paper to examine the effect on readability of cross-listed Asian companies. I use a measure of secrecy developed in Hope at al. (2008) to study its effect on readability. The sample of this paper consists of all 68 Asian companies from nine countries listed on NYSE/NASDAQ, that are registered and reporting with the SEC. The univariate and multivariate analyses show that companies whose domestic culture is more secretive are providing less readable financial statements. This result is robust to sensitivity tests. This is an interesting and important result in line with the efforts being made to have convergence in the International accounting area. This is despite the fact that a large number of these companies are using IFRS and U.S. GAAP to prepare their financial statements. The results also show that companies with higher ownership dispersion are providing more readable annual reports. The results fail to reject the hypothesis related to the effect of profitability. Finally, the results show that larger sample companies are providing more difficult to read financial statements. These results have important implications for international investors and global standard-setting bodies. 

Author Biography

Gaurav Kumar, University of Arkansas at Little Rock
Associate Professor of Accounting
Research Articles