Performance and Readability of Corporate Annual Reports of PCBs in Bangladesh

Abstract

<p><em>Investors, both existing and potential, rely largely on corporate annual reports when making important strategic and financial decisions. Corporate annual reports contain information about the company and its performances that are expressed both in quantitative and narrative texts. Though the principal objective of the narrative texts is to supplement the report&rsquo;s financial statements, they have a great importance to the individual investors, especially to those who don&rsquo;t have sufficient background knowledge in accounting. In recent years readability of corporate annual reports has become a concern of the accounting regulatory agencies in countries like United States of America and Great Britain. In Bangladesh the urgency of improving the readability of corporate annual reports is not felt by concerned people yet. Very few studies attempted to find out the readability of corporate annual reports in Bangladesh. The present study aims at analyzing and comparing readability of corporate annual reports of private commercial Banks (PCBs) in Bangladesh. Readability assessment tools such as Flesch test (1948) and Lix test (1968) have been used. Readability of four text sections of the corporate annual reports such as chairman&rsquo;s address, directors&rsquo; report, notes to the accounts and auditor&rsquo;s report have been studied. Flesch scores have been calculated using Microsoft Word computer package program. Lix scores have been calculated using manual physical count from the same texts that have been selected for the Flesch score. It is observed from the study that the texts of corporate annual reports are difficult or very difficult to read. This indicates that the corporate annual reports of the PCBs in Bangladesh are persistently maintaining poor readability. One of the important findings of the study is that PCBs of the country with larger deposits have tendency to use difficult languages in their corporate annual reports. Other measures of size of PCBs or their earnings do not have significant association with readability of corporate annual reports.</em></p>

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