Readability of Annual Reports and the Agency Problem of Corporation in the Context of Pakistan

Abstract

This study is conducted to investigate the issue of readability of the annual report, which caused the conflict between the shareholders and the management. Annual reports are the integral source of information for the shareholders regarding their investment. To investigate the importance of the readability, we took the data of 21 non-financial companies which are in the KSE-30 index of Pakistan for the 10 years (2008-2017). The findings of our results depict that those firms whose annual report is more readable as compare to other facing low problem of the conflict between the shareholders and the management. Further results of this study indicate that under the better quality measures, relevent audit increase the readability of the annual report which reduce the agency cost.