Religiosity at the Top and Annual Report Readability

Toufiq Nazrul (), Adam Esplin, Kevin E. Dow and David M. Folsom
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Toufiq Nazrul: Accounting and Information Systems Department, The University of Texas at El Paso, El Paso, TX 79968, USA
Adam Esplin: Accounting and Information Systems Department, The University of Texas at El Paso, El Paso, TX 79968, USA
Kevin E. Dow: Accounting and Information Systems Department, The University of Texas at El Paso, El Paso, TX 79968, USA
David M. Folsom: Accounting and Information Systems Department, The University of Texas at El Paso, El Paso, TX 79968, USA

JRFM, 2022, vol. 15, issue 10, 1-19

Abstract: This paper examines how individual religiosity at the top level of organizations affects the quality of their disclosure practices, as measured by the readability of annual reports. Our paper extends the recent accounting and finance literature that moves away from a location-based measure to an individual-based measure for capturing the effect of religiosity. Our findings suggest that the individual religiosity of C-suite executives matters in corporate decision-making and has positive implications for the quality of corporate disclosure practices, as reflected by more readable reports. This main finding is primarily driven by the religiosity of CEOs. Additional findings also suggest that the effect of religiosity is not solely driven by the religious denomination of the majority group within a given location-based setting. Previous research using religiosity proxies based on the majority religion in the locale of firms’ headquarters may have measurement issues that disguise the effect of religiosity. This issue is particularly problematic when CEOs or other executives participate in minority religious denominations. Overall, our paper finds that CEO religiosity is an important attribute that affects the overall quality of business practice.

Keywords: readability; CEO religiosity; disclosure; machine learning; predictive analytic regression model (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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