Annual Report Readability And Corporate Bankruptcy

Main Article Content

Julien Le Maux
Nadia Smaili

Keywords

10-K, Altman’s Score, Annual Report, Bankruptcy Risk, Readability

Abstract

This study investigates the relationship between a firm’s annual report readability and its probability of bankruptcy. Findings show that firms with a larger 10-K file size have a higher probability of bankruptcy. More specifically, we suggest that there is a curvilinear relationship between annual report readability and bankruptcy probability. However, this relation is not significant for small firms. We further suggest that annual report readability has incremental power in predicting corporate bankruptcy. While prior accounting and finance research mainly used financial and accounting ratios as predictive variables of firm bankruptcy, we add a new non-financial predictive variable to these models.

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