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Year and Industry-level Accounting Narrative Analysis: Readability and Tone Variation

Lookup NU author(s): Dr Ekaete Efretuei



This is the authors' accepted manuscript of an article that has been published in its final definitive form by American Accounting Association, 2020.

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In this study, I examine variations in the textual complexity of annual report narrative disclosures using the Fog Readability Index and Fin-Neg word list Tone Index given year and industry effects. I analyse accounting narrative Readability and Tone based on firm years, associations between the two narrative measures, and industry data. Tests of the relationship between Readability and Tone show that negative narratives have higher Readability scores, supporting the obfuscation hypothesis that bad news tends to be more difficult to read. A year analysis shows that the negative relationship between Readability and Tone increases in significance over time (2006–2011). An industry analysis shows that the observed obfuscation tends to persist in basic materials; consumer services; financial; technology; and utilities industries. This study shows that considering the effect of variations between industry and firm years can inform annual report textual complexity research and associated empirical analyses.

Publication metadata

Author(s): Efretuei E

Publication type: Article

Publication status: Published

Journal: Journal of Emerging Technologies in Accounting

Year: 2020

Volume: n/a

Pages: 1-50

Online publication date: 18/11/2020

Acceptance date: 16/11/2020

Date deposited: 14/12/2020

ISSN (print): 1554-1908

ISSN (electronic): 1558-7940

Publisher: American Accounting Association


DOI: 10.2308/JETA-18-12-21-26

Notes: e-pub ahead of print


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