Readability of Annual Reports and Operating Performance of Indian Banking Companies

IF 1.8 Q3 MANAGEMENT IIM Kozhikode Society & Management Review Pub Date : 2021-01-01 DOI:10.1177/2277975220941946
M. Jayasree, Rachappa Shette
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引用次数: 7

Abstract

Existing literature focuses on the evaluation of the readability of annual reports of non-banking companies. However, banking companies’ opaque nature and a double motivation to abuse accounting discretion requires a separate study on the readability of banks’ annual reports in association with their performance. We, therefore, attempt to explore firm performance and readability of banking firms’ annual reports in India. Net interest margin (NIM) and Fog Index are used as performance and readability variables respectively. We find that management discussion and analysis (MD&A) of the Indian banks is difficult to read. However, when we compare it with existing literature, Indian banks’ MD&A is difficult but not unreadable. Panel data regression analysis shows that firm performance would have a negative impact on the Fog Index. Further analysis of good and weak performing banking firms shows that the effect of NIM on Fog Index is higher in the case of weak performing banks. Empirical results affirm that firms with weak performance would structure their annual reports to veil adverse information in unfavourable situations. Consistent with the opaque nature of banks and incomplete revelation, managers of banks make MD&A harder to read to cover up the causes of weak performance. Application of readability index in case of banking companies in an emerging economy in association with performance is the contribution of this paper. An assessment of the readability of annual reports is an interesting topic for research to better understand the recent negative developments in Indian banking industry such as high non-performing assets, continuously declining return on assets, sharp increase in banking frauds and poor governance.
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印度银行公司年度报告和经营业绩的可读性
现有文献侧重于评估非银行公司年度报告的可读性。然而,银行公司不透明的性质和滥用会计自由裁量权的双重动机要求对银行年报的可读性及其业绩进行单独研究。因此,我们试图探索印度银行公司的业绩和年度报告的可读性。净息差(NIM)和雾指数分别用作性能和可读性变量。我们发现,印度银行的管理层讨论和分析(MD&A)很难阅读。然而,当我们将其与现有文献进行比较时,印度银行的MD&A是困难的,但并非不可读。面板数据回归分析表明,企业业绩将对雾指数产生负面影响。对表现良好和表现不佳的银行公司的进一步分析表明,在表现不佳的情况下,NIM对雾指数的影响更大。实证结果证实,业绩不佳的公司会在不利的情况下构建年度报告,以掩盖不利信息。与银行的不透明性和不完全披露相一致,银行经理让MD&A更难解读,以掩盖业绩疲软的原因。可读性指数在新兴经济体银行公司业绩中的应用是本文的贡献。评估年度报告的可读性是一个有趣的研究主题,以更好地了解印度银行业最近的负面发展,如高不良资产、资产回报率持续下降、银行欺诈急剧增加和治理不善。
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来源期刊
CiteScore
3.90
自引率
31.20%
发文量
25
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