The Effect of Annual Report Readability on Earnings-return Association

• Main Authors: Pei-Wen Chuang, 莊佩雯
• Other Authors: Wen-Hsin Hsu
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/73574891105779926617

碩士 === 國立臺灣大學 === 會計學研究所 === 99 === This thesis would like to address three questions related to financial report readability and the informativeness of earnings for U.S. cross-lists. First, I consider whether readability of financial statements can affect their ERCs (proxy for the informativeness of earnings). Then I examine whether the importance of readability is more pronounced for firms with higher reconciliation differences. Finally, I examine whether the information lost due to the elimination of reconciliation requirement can be counteracted by good financial report readability. The findings show that there is a positive relationship between ERCs and financial report readability, suggesting that higher readable disclosures increase investors’ ability to process information and provide more information to the market, thus providing a higher level of ERCs. In addition, the positive association between readability and ERCs tends to be more pronounced for firms with larger reconciliation differences, indicating the information asymmetry and uncertainty about the underlying economic earnings due to reconciliation differences perceived by investors can be reduced as the readability of financial reporting increases. With respect to the final question, I find the positive association between readability and ERCs has become more pronounced after eliminating the reconciliation rule, suggesting readability of financial report can counteract balance the information lost due to the elimination of the reconciliation requirement.