Does annual report readability influence the design of SEOs?

Puwanenthiren, P., Md Saiful Azam, Muhammad Jahangir Ali and Sivathaasan Nadarajah 2024. Does annual report readability influence the design of SEOs? International Review of Economics and Finance. 93 (Part A), pp. 970-984. https://doi.org/10.1016/j.iref.2024.03.062

TitleDoes annual report readability influence the design of SEOs?
TypeJournal article
AuthorsPuwanenthiren, P., Md Saiful Azam, Muhammad Jahangir Ali and Sivathaasan Nadarajah
Abstract

Motivated by the rapid growth in non-quantitative corporate disclosure and seasoned equity offerings (SEOs) in the U.S., we take a fresh look at the decision-making process behind accelerated offerings in SEOs, with a specific emphasis on the readability of annual reports within 10-K filings. In particular, our study explores whether readability of annual reports affects the choice of SEOs methods. Using a hand-collected sample of 3143 instances of seasoned equity issues between 2002 and 2021, we show a significantly positive relation between readability scores and accelerated offerings. These results hold across various robustness tests. We further reveal a negative relationship between abnormal operating performance and long-term stock performance following the announcements of SEOs, demonstrating that: firstly, SEOs provide valuable insights into future earnings; and secondly, these insights have a lasting impact on stock performance. Overall, our evidence strongly highlights the substantial influence of annual report readability on the design of SEOs, emphasizing the critical importance of conveying financial information concisely and effectively to the market.

KeywordsReadability
SEOs
Accelerating offerings
Rights offerings
JournalInternational Review of Economics and Finance
Journal citation93 (Part A), pp. 970-984
ISSN1873-8036
1059-0560
Year2024
PublisherElsevier
Publisher's version
License
CC BY-NC 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1016/j.iref.2024.03.062
Publication dates
Published online28 Mar 2024
Published in printJun 2024

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