사업보고서 가독성과 경영자 잠정실적공시 간의 관계

This paper investigates how the readability of annual reports affects the manager’s timely disclosure decisions. The manager’s intention would be reflected in the linguistic characteristics of the annual reports since they are prepared according to a regulated format(Lee 2017). So, it is important to understand the language characteristics which are contained in the reports. Information in poorly readable annual reports is less likely to be reflected in stock prices as investors might less use the information due to high information processing costs. According to previous studies on annual report readability, as the earnings quality is lower, managers with an opportunistic purpose disclose unreadable annual reports(Jung et al. 2018). According to the obfuscation theory, managers would control the readability of annual reports to make unfavorable accounting information slowly reflected in the stock price. Managers who disclose unreadable annual reports will disclose preliminary earnings to facilitate the reflection of favorable information on price. Opportunistic managers can use disclosure of preliminary earnings to offset negative accounting information contained in annual reports. Disclosure of preliminary earnings serves to assist market investors in their decision-making by providing performance information before the publication of annual reports(Sohn and Lee 2005; Baik et al. 2012). However, since the preliminary earnings are subject to change in the future with the settlement of accounts not finalized, there would be a room for misuse depending on the opportunistic purpose of management(Lee et al. 2011; Kim 2018b). According to the empirical analysis results, it can be seen that managers establish a disclosure strategy that uses the accuracy of preliminary earnings or timing of announcing them to highlight positive news and hide negative news(Kim 2018a; Kim 2018b). Managers who disclose unreadable annual reports because they want information on future performance to be reflected in the market price slowly, would hide actual performance through non regular disclosures and send positive signals to the market by disclosing optimistic information. Therefore, this study analyzes the relation between the readability of annual reports and the disclosure of preliminary earnings to verify whether the manager’s intention to reduce the timeliness of negative accounting information through annual reports is reflected in disclosure of preliminary earnings. Proxying for annual report readability using the Flesch ease index, Fog index, and the length of the reports which are commonly used in accounting literature, we found that managers who disclose unreadable annual reports are more likely to disclose preliminary earnings. It is interpreted that managers slow down the rate at which negative accounting information is reflected in stock prices by disclosing unreadable annual reports, and make preliminary earnings disclosures to deliver a positive signal to the market. Second, it was found that firms disclosing annual reports with low readability have a large error in the disclosure of preliminary earnings, and the bias of disclosed preliminary earnings is also large. In particular, the relation between the readability of the annual report and the bias of preliminary earnings is strong in the sample that discloses upward biased preliminary earnings. These results mean that managers who disclose unreadable annual reports are likely to disclose preliminary earnings opportunistically, and the managers’ intention to hide negative accounting information through optimistic performance disclosure is reflected in the disclosure strategy. This study is meaningful in that it verified that the linguistic characteristics of annual reports are related to non regular disclosure strategies by expanding previous studies that the qualitative attributes of accounting information affect the linguistic characteristics of annual reports. The manager’s intention is reflected in the linguistic characteristics of the annual report, and these managers control the reflection of accounting information in the stock price by strategically using the preliminary earnings disclosure. In addition, this study expanded prior research on disclosure by verifying that managers’ intentions are reflected in non regular disclosure as well as regular.