RT Article
T1 Board gender diversity and managerial obfuscation: evidence from the readability of narrative disclosure in 10-K reports
JF Journal of business ethics
VO 179
IS 1
SP 153
OP 177
A1 Nadeem, Muhammad
LA English
PB Springer Science + Business Media B. V
YR 2022
UL https://ixtheo.de/Record/1811497756
AB The readability of 10-K reports, in terms of linguistic complexity, determines the usefulness of information disclosure for stakeholders, particularly individual investors. Since investors largely depend on the financial communication in 10-K reports, firms have an ethical and legal responsibility to present disclosures in a language investors can understand. However, motivated by self-interest, managers obfuscate such disclosures to mask their own actions and hide unfavourable information. Building on the managerial obfuscation hypothesis grounded in stakeholder-agency and ethical-sensitivity theories, I hypothesize and empirically test the relationship between board gender diversity (BGD) and the readability of narrative disclosure in 10-K reports. Based on a relatively large sample of Russell 3000 firms for the years 2002-2018 (6,268 observations), I find a significant positive impact of BGD on 10-K reports’ readability, which in turn improves firm performance. Channel analysis reveals that the findings are driven by (a) female independent directors, and (b) their representation on audit and compensation committees; however, board activity (board meetings and directors’ attendance) does not appear to drive this relationship. Finally, I find that although gender discrimination in the appointment of directors spurs complex readability, the BGD-readability relationship is consistent in gender-biased and non-discriminant firms. I also check the robustness of our main empirical results in several ways. My study has important regulatory and managerial implications in that corporate governance is an important determinant of the readability of disclosure documents.
K1 annual reports
K1 Board gender diversity
K1 G14
K1 G34
K1 M40
K1 Managerial obfuscation
K1 Readability
K1 Stakeholder-agency theory
K1 Aufsatz in Zeitschrift
DO 10.1007/s10551-021-04830-3