Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory

As an intangible asset, managerial ability is believed to be one of the components of corporate human capital. According to signaling theory, capable managers usually perform well and are less likely to hide their appropriate performance. Therefore, they tend to disclose more readable financial repo...

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Autores principales:	Mehdi Safari Gerayli (Ph.D), Yasser Rezaei pitenoei (Ph.D)
Formato:	article
Lenguaje:	FA
Publicado:	Shahid Bahonar University of Kerman 2018
Materias:	managerial ability financial reporting readability signaling theory Accounting. Bookkeeping HF5601-5689
Acceso en línea:	https://doaj.org/article/69d0d4e729564116881348ac4e38bce6
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spelling	oai:doaj.org-article:69d0d4e729564116881348ac4e38bce62021-11-04T19:54:00ZManagerial Ability and Financial Reporting Readability: A Test of Signaling Theory2008-89142476-292X10.22103/jak.2018.11261.2548https://doaj.org/article/69d0d4e729564116881348ac4e38bce62018-07-01T00:00:00Zhttps://jak.uk.ac.ir/article_2049_910bd8e93520f394ecae03fd3c0381be.pdfhttps://doaj.org/toc/2008-8914https://doaj.org/toc/2476-292XAs an intangible asset, managerial ability is believed to be one of the components of corporate human capital. According to signaling theory, capable managers usually perform well and are less likely to hide their appropriate performance. Therefore, they tend to disclose more readable financial report, thereby communicating their optimum performance and ability to stakeholders and markets. According to this argument, thus, the present study is concerned with investigating the impact of managerial ability on the readability of corporate financial reporting. To this end, FOG Index and Text Length index are used to compute the readability of financial reporting, and to measure the managerial ability, Demerjian et al. (2012) model is employed. The research hypothesis was developed on a basis of a sample of 91 firms listed on the Tehran Stock Exchange during the years 2012- 2016, and then was tested using multivariate regression model based on panel data. Confirming the predictions made by signaling theory, the results suggest that managerial ability can improve corporate financial reporting readability. The results of additional analyses also reveal that the relationship between managerial ability and financial reporting readability is more pronounced in larger firms.Mehdi Safari Gerayli (Ph.D)Yasser Rezaei pitenoei (Ph.D)Shahid Bahonar University of Kermanarticlemanagerial abilityfinancial reporting readabilitysignaling theoryAccounting. BookkeepingHF5601-5689FAمجله دانش حسابداری, Vol 9, Iss 2, Pp 191-218 (2018)
institution	DOAJ
collection	DOAJ
language	FA
topic	managerial ability financial reporting readability signaling theory Accounting. Bookkeeping HF5601-5689
spellingShingle	managerial ability financial reporting readability signaling theory Accounting. Bookkeeping HF5601-5689 Mehdi Safari Gerayli (Ph.D) Yasser Rezaei pitenoei (Ph.D) Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory
description	As an intangible asset, managerial ability is believed to be one of the components of corporate human capital. According to signaling theory, capable managers usually perform well and are less likely to hide their appropriate performance. Therefore, they tend to disclose more readable financial report, thereby communicating their optimum performance and ability to stakeholders and markets. According to this argument, thus, the present study is concerned with investigating the impact of managerial ability on the readability of corporate financial reporting. To this end, FOG Index and Text Length index are used to compute the readability of financial reporting, and to measure the managerial ability, Demerjian et al. (2012) model is employed. The research hypothesis was developed on a basis of a sample of 91 firms listed on the Tehran Stock Exchange during the years 2012- 2016, and then was tested using multivariate regression model based on panel data. Confirming the predictions made by signaling theory, the results suggest that managerial ability can improve corporate financial reporting readability. The results of additional analyses also reveal that the relationship between managerial ability and financial reporting readability is more pronounced in larger firms.
format	article
author	Mehdi Safari Gerayli (Ph.D) Yasser Rezaei pitenoei (Ph.D)
author_facet	Mehdi Safari Gerayli (Ph.D) Yasser Rezaei pitenoei (Ph.D)
author_sort	Mehdi Safari Gerayli (Ph.D)
title	Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory
title_short	Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory
title_full	Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory
title_fullStr	Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory
title_full_unstemmed	Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory
title_sort	managerial ability and financial reporting readability: a test of signaling theory
publisher	Shahid Bahonar University of Kerman
publishDate	2018
url	https://doaj.org/article/69d0d4e729564116881348ac4e38bce6
work_keys_str_mv	AT mehdisafarigerayliphd managerialabilityandfinancialreportingreadabilityatestofsignalingtheory AT yasserrezaeipitenoeiphd managerialabilityandfinancialreportingreadabilityatestofsignalingtheory
_version_	1718444595689291776

Managerial Ability and Financial Reporting Readability: A Test of Signaling Theory

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