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Executive age and the readability of financial reports

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  • Xu, Qiao
  • Fernando, Guy D.
  • Tam, Kinsun

Abstract

Concerns have been raised by regulators and investors about the increasingly complex financial reports that are becoming incomprehensible to ordinary investors. The readability literature attributes unreadable financial reports to the reporting firms' operational complexity and/or the desire to obfuscate poor performance. At the same time, upper echelons theory from the management literature posits that top managers' characteristics will impact the way the firm is managed, while business and social science research posits that individuals become more capable and ethical as they grow older. We expect older CEOs and executives to be more capable of explaining operating complexities and staying ethical in reporting, thus leading to more readable financial reports. Our results support this view.

Suggested Citation

  • Xu, Qiao & Fernando, Guy D. & Tam, Kinsun, 2018. "Executive age and the readability of financial reports," Advances in accounting, Elsevier, vol. 43(C), pages 70-81.
    • Handle: RePEc:eee:advacc:v:43:y:2018:i:c:p:70-81
    DOI: 10.1016/j.adiac.2018.09.004
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    6. Malm, James & Adhikari, Hari P. & Krolikowski, Marcin W. & Sah, Nilesh B., 2021. "The old guard: CEO age and corporate litigation," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    7. Yaghoubi, Mona, 2024. "Executive characteristics as moderators: Exploring the impact of geopolitical risk on capital structure decisions," International Review of Financial Analysis, Elsevier, vol. 93(C).

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