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Title: The influence of connotation on readability and obfuscation in Australian chairman addresses
Contributor(s): Bayerlein, Leopold  (author)orcid ; Davidson, Paul John (author)
Publication Date: 2011
DOI: 10.1108/02686901211189853
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Abstract: Purpose - The purpose of this paper is to extend and improve prior readability and obfuscation research by investigating the effect of connotation on readability and obfuscation. Furthermore, the paper aims to develop and apply a novel connotation-based obfuscation assessment approach. Design/methodology/approach - In total, 87 chairman reports of firms included in the Standard & Poor's ASX200 index were analyzed. The readability of sections and connotation-based groups of sentences within these narratives were assessed using the Flesch readability formula. The presence or absence of obfuscation within the analyzed chairman addresses was determined using a novel connotation-based obfuscation assessment approach. Findings - The study demonstrates that the mid section within the analyzed chairman addresses was significantly more difficult to read than the first and last sections. However, the notion that these reading difficulty differences were due to the prevalence of positive and negative news within these sections could not be supported. A subsequent analysis of the reading difficulty differences between connotation-based groups of sentences identified the largely positive group of sentences as an important source of reading difficulty. Finally, the advantages resulting from an application of the connotation-based obfuscation assessment developed in this paper over the traditional obfuscation assessment techniques used in prior literature are demonstrated. Originality/value - This paper provides a substantial contribution to the literature by establishing a direct link between the connotation of information provided in financial reporting narratives and the readability and obfuscation exhibited by these narratives. The novel assessment approach developed in this paper can be used to benefit preparers and users of financial reporting information by identifying types of sentences whose preparation and/or analysis should be approached cautiously.
Publication Type: Journal Article
Source of Publication: Managerial Auditing Journal, 27(2), p. 175-198
Publisher: Emerald Group Publishing Ltd
Place of Publication: United Kingdom
ISSN: 0268-6902
Field of Research (FOR): 150102 Auditing and Accountability
150199 Accounting, Auditing and Accountability not elsewhere classified
Socio-Economic Outcome Codes: 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
900101 Finance Services
Peer Reviewed: Yes
HERDC Category Description: C1 Refereed Article in a Scholarly Journal
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