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#12427. Annual report readability, agency costs, firm performance: an investigation of Omans financial sector
| July 2026 | publication date |
| Proposal available till | 11-05-2025 |
| 4 total number of authors per manuscript | 0 $ |
| The title of the journal is available only for the authors who have already paid for |
| Journal’s subject area: |
| Sociology and Political Science; Development; Accounting; |
| place 1 | place 2 | place 3 | place 4 |
| Free | Free | Free | Free |
| 2350 $ | 1200 $ | 1050 $ | 900 $ |
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Abstract:
The readability of annual reports is an important feature that determines the quality of communication between a firm and its stakeholders. Extant literature has demonstrated that readability characteristics of annual reports are crucial in facilitating the investors ability to process and analyze information, resulting in higher firm performance and lower agency costs. This study examines the relationship between annual report readability, agency costs and the firm performance of listed financial sector companies in Oman. A panel regression analysis is used, along with the generalized method of moments (GMM) estimation to address endogeneity concerns. The readability of annual reports is proxied by the length of the annual report, the Flesch reading ease and the Flesch–Kincaid index. The ordinary least squares (OLS) results suggest that readability proxied by the length of the annual report has no significant relationship with agency cost, return on assets (ROA) or stock returns. The OLS results are confirmed through the system GMM estimation model for agency costs, Tobins Q and stock returns. Easier-to-read annual reports measured by the Flesch reading ease demonstrate high asset utilization ratio and Tobins Q. These results emphasize Flesch reading ease measure in explaining the economic significance of agency cost and Tobins Q. In contrast, difficult-to-read annual reports are observed for firms with high ROA.
Keywords:
Agency costs; Annual report readability; Financial sector; Firm performance
Contacts :
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Abstract:
The readability of annual reports is an important feature that determines the quality of communication between a firm and its stakeholders. Extant literature has demonstrated that readability characteristics of annual reports are crucial in facilitating the investors ability to process and analyze information, resulting in higher firm performance and lower agency costs. This study examines the relationship between annual report readability, agency costs and the firm performance of listed financial sector companies in Oman. A panel regression analysis is used, along with the generalized method of moments (GMM) estimation to address endogeneity concerns. The readability of annual reports is proxied by the length of the annual report, the Flesch reading ease and the Flesch–Kincaid index. The ordinary least squares (OLS) results suggest that readability proxied by the length of the annual report has no significant relationship with agency cost, return on assets (ROA) or stock returns. The OLS results are confirmed through the system GMM estimation model for agency costs, Tobins Q and stock returns. Easier-to-read annual reports measured by the Flesch reading ease demonstrate high asset utilization ratio and Tobins Q. These results emphasize Flesch reading ease measure in explaining the economic significance of agency cost and Tobins Q. In contrast, difficult-to-read annual reports are observed for firms with high ROA.
Keywords:
Agency costs; Annual report readability; Financial sector; Firm performance
Contacts :
