Research Paper on The Impact of Management Qualities on Readability of Audit Reports

Description

Title: The Impact of Management Qualities on Readability of Audit Reports

Abstract: The current study examines the connection between management traits (managerial entrenchment, CEO narcissism, overconfidence, board effort, real and accrual-based earnings management) and the readability of audit reports for listed companies. This study aims to determine “whether management characteristics can have a favorable effect on the audit report readability or not,” to put it another way. This study employs the multivariate regression model. Research hypotheses were also examined by applying multiple regression patterns based on a panel data technique and a fixed effects model to a sample of 1004 observations made on the Tehran Stock Exchange between 2012 and 2018. According to the findings, there is a negative and statistically significant relationship between managerial entrenchment, real and accrual-based earnings management, and the readability of the audit report based on the FOG index. However, there is a positive and statistically significant relationship between management narcissism, CEO overconfidence, and board effort and the readability of the audit report based on the FOG index. Additionally, there is a poor and significant correlation between management entrenchment, CEO arrogance, management of real and accrual-based earnings, and readability of audit reports based on text length and Flesch indices. Based on the same indices, a positive and significant correlation between CEO narcissism and board effort and audit report readability was visible. Additionally, research models were verified using additional methods, such as FE, T + 1, ABB, and GMM, which support the study’s initial findings. Because this study is the first to look into this subject in the emerging markets, it offers useful details about the intrinsic and acquisitive qualities of management for users, analysts, and governmental organizations that are crucial to financial statement readability.

Keywords: managerial entrenchment; CEO overconfidence; real and accrual-based earnings management; audit report readability; board effort

Paper Quality: SCOPUS / Web of Science Level Research Paper

Subject: Economics

Writer Experience: 20+ Years

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