Readability of narrative disclosures, and corporate liquidity and payout policies

Mostafa Monzur Hasan and Ahsan Habib

International Review of Financial Analysis, 2020, vol. 68, issue C

Abstract: In this paper, we examine the relation between the readability of narrative disclosures in 10-K reports, and corporate liquidity and payout policies. We find that firms with less readable disclosures hold significantly more cash. We also find that this relationship is stronger for firms with weak corporate governance, and with higher financing constraints and refinancing risks. Further analysis also shows that firms with less readable disclosures pay fewer cash dividends and repurchase less stock. Our findings are robust to different estimation methods, and to alternative specifications of key variables. The findings from this study contribute to the emerging research that stresses the importance of 10-K report readability in protecting shareholder wealth.

Keywords: Readability of narrative disclosures; Cash holdings; Payout policy (search for similar items in EconPapers)
JEL-codes: D80 G32 G35 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:68:y:2020:i:c:s1057521919302583

DOI: 10.1016/j.irfa.2020.101460

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