Annual report readability and stock return synchronicity: Evidence from India

Gangadha an, Vismaya; Padmakuma i, Lakshmi A icle Annual epo eadabili y and s ock e u n synch onici y: E idence om India Cogen Economics & Finance P o ided in Coope a ion wi h: Taylo & F ancis G oup Sugges ed Ci a ion: Gangadha an, Vismaya; Padmakuma i, Lakshmi (2023) : Annual epo eadabili y and s ock e u n synch onici y: E idence om India, Cogen Economics & Finance, ISSN 2332-2039, Taylo & F ancis, Abingdon, Vol. 11, Iss. 1, pp. 1-22, h ps://doi.o g/10.1080/23322039.2023.2186034 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/304002 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ Cogen Economics & Finance ISSN: (P in ) (Online) Jou nal homepage: www. and online.com/jou nals/oae 20 Annual epo eadabili y and s ock e u n synch onici y: E idence om India Vismaya Gangadha an & Lakshmi Padmakuma i To ci e his a icle: Vismaya Gangadha an & Lakshmi Padmakuma i (2023) Annual epo eadabili y and s ock e u n synch onici y: E idence om India, Cogen Economics & Finance, 11:1, 2186034, DOI: 10.1080/23322039.2023.2186034 To link o his a icle: h ps://doi.o g/10.1080/23322039.2023.2186034 © 2023 The Au ho (s). This open access a icle is dis ibu ed unde a C ea i e Commons A ibu ion (CC-BY) 4.0 license. Published online: 08 Ma 2023. Submi you a icle o his jou nal A icle iews: 1563 View ela ed a icles View C ossma k da a Ci ing a icles: 4 View ci ing a icles Full Te ms & Condi ions o access and use can be ound a h ps://www. and online.com/ac ion/jou nalIn o ma ion?jou nalCode=oae 20 FINANCIAL ECONOMICS | RESEARCH ARTICLE - REPLICATION STUDY Annual epo eadabili y and s ock e u n synch onici y: E idence om India 1 Vismaya Gangadha an 1 * and Lakshmi Padmakuma i 1 Abs ac : This s udy in es iga es he ela ionship be ween he comp ehensibili y o a i m’s annual epo and i s s ock e u n synch onici y in he Indian ma ke . The s udy employs he eadabili y o annual epo s as a measu e o he cos o in o ma ion p ocessing. The indings sugges ha i ms wi h mo e eadable annual epo s end o display highe s ock e u n synch onici y. This ela ionship implies ha mo e legible inancial disclosu es a e associa ed wi h mo e e icien and anspa en capi al ma ke s. Addi ionally, he esea ch disco e ed ha he ela- ionship be ween eadabili y and s ock e u n synch onici y is pa icula ly p o- nounced o companies wi h high ins i u ional in es men , high analys co e age, and lowe in o ma ion asymme y. The sample size o he s udy encompasses NSE 500 companies o he pe iod 2015–2016 o 2019–2020. Subjec s: Co po a e Finance; In es men & Secu i ies; Business E hics Keywo ds: Annual epo eadabili y; Analys ollowing; Ins i u ional in es o s; In o ma ion asymme y; Synch onici y JEL Classi ica ion: G10; G14 1. In oduc ion How anspa en and accu a e is he in o ma ion en i onmen in he eme ging ma ke s has always been a conce n o esea che s; because esea che s we e suspicious abou he co po a e go e n- ance sys em, le el o in o ma ion asymme y, and ma ke e iciency in eme ging ma ke s (Fa ooq & Ahmed, 2014; Fa ooq & Hamouda, 2016). I has been es ablished ha he quali y o he in o ma ion en i onmen in luences he pe o mance o s ocks in he ma ke . The alue o a company’s s ock e lec s he a ailabili y o in o ma ion a he indus y, ma ke , and i m- speci ic le el. The speed a which in es o s inco po a e his in o ma ion in o s ock p ices de e - mines he ad an ages o hese in es o s. The s ock p ice luc ua es as a esul o he inco po a- ion o speci ic in o ma ion abou he i m in o he s ock p ices (Pio oski & Rouls one, 2004). The inco po a ion o in o ma ion in o he s ock p ices de e mines he co-mo emen o s ock e u n wi h he ma ke e u n. S ock e u n synch onici y (he ea e Synch onici y) “measu es he co- mo emen o a i m’s e u n wi h he ma ke e u n and he ex en o which indus y and ma ke e u ns explain he a iabili y in indi idual s ock e u n”(Du ne e al., 2003). E idence indica es ha in o ma ion anspa ency and asymme y a e essen ial de e minan s o Synch onici y (Fa ooq & Ahmed, 2014). To a g ea ex en , in o ma ion anspa ency can be cap u ed om he disclosu e p ac ices; because he inancial disclosu es a e public documen s, and hey a e he p ima y sou ce o in o ma ion o he in es o s. Hence disclosu e p ac ices play an essen ial ole in de e mining he in o ma ion en i onmen . Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 1 o 22 Recei ed: 05 Oc obe 2022 Accep ed: 25 Feb ua y 2023 *Co esponding au ho : Vismaya Gangadha an, Finance and Accoun ing a ea, IFMR GSB, K ea Uni e si y, S ici y, Andh a P adesh, India E-mail: [email p o ec ed] Re iewing edi o : Da id McMillan, Uni e si y o S i ling, S i ling Uni ed Kingdom Addi ional in o ma ion is a ailable a he end o he a icle © 2023 The Au ho (s). This open access a icle is dis ibu ed unde a C ea i e Commons A ibu ion (CC-BY) 4.0 license. Publicly aded i ms publish inancial disclosu es on a con inual basis. Financial disclosu es like he annual epo s a e manda o y acco ding o he egula ion (Secu i ies Exchange Boa d o India (Annual Repo s) Rules, 1994), bu i ms some imes olun a ily publish addi ional disclosu es o p o ide mo e in o ma ion o he s akeholde s. Amongs all he manda o y disclosu es, annual epo s a e he mos comp ehensi e disclosu e, which includes de ailed in o ma ion abou he inancial and non- inancial ac i i ies o a i m du ing he pas inancial yea . Gene ally, an annual epo con ains inancial s a emen s, highligh s o he pe o mance om he p eceding yea , cu en pe o mance, a le e om he Chie Execu i e O ice (CEO), and ou look o u u e yea s. Acco ding o he Secu i ies and Exchange Boa d o India (SEBI), an annual epo should con ain a ull and ai pic u e o he ac i i ies, policies, and p og ammes unde aken du ing he pas inancial yea . Mo eo e , annual epo s published by companies a e he main sou ce o in o ma ion o he capi al ma ke pa icipan s. Abou 80% o an annual epo is ex ; hence p ope comp ehension is essen ial o ensu e he use ulness o he in o ma ion (Cheng e al., 2018). The e o e, ex ual p ope ies like eadabili y impac he e ec i eness o communica ing ele an in o ma ion be ween he i m and ma ke pa icipan s (E ug ul e al., 2017). Readabili y enhances he use ulness and in o ma i eness o he con en . Following Kla e, (2000), eadabili y in his pape is de ined as he “ease o unde s anding due o he s yle o w i ing”. All he publicly a ailable in o ma ion is ac o ed in o he s ock p ices as pe he semi-s ong E icien Ma ke Hypo hesis (EMH). Semi-s ong EMH does no hold when he inancial disclosu es a e complex; because he in o ma ion usage educes due o he di e ences in he in o ma ion p ocessing expe ise among he use s. The Incomple e Re ela ion Hypo hesis (IRH) pos ula es ha in o ma ion ha incu s signi ican cos in e ms o p ocessing and ex ac ion om inancial disclosu es ends o be less comple ely in eg a ed in o ma ke p ices (R. Bloom ield, 2008). Hence he chances o in o ma ion asymme y a e highe when he inancial disclosu es a e less eadable. E en i he in o ma ion is publicly a ailable, hey a e no always use ul o unin o med in es o s. Secu i ies Exchange Commission (SEC) a gues ha disclosu es ha a e easie o unde - s and imp o e he con en ’s in o ma i eness; i can be e in o m he in es o s abou he i m pe o mance (SEC 1998). As Annual Repo Readabili y (he ea e ARR) dec eases, he associa ed cos o in o ma ion p ocessing inc eases. This in u n leads o a decline in he quali y o disclosu es. This is because complex disclosu es necessi a e ha use s expend mo e e o and ime o iden i y and ex ac ele an in o ma ion o hei use (R. Bloom ield, 2008; Li, 2008). G ossman and S igli z (1980) ind ha when he ex ual con en s a e cos lie o p ocess and unde s and a e no comple ely inco po a ed in he s ock p ices. The Managemen Ob usca ion Hypo hesis (MOH) s a es ha manage s in en ionally ob usca e poo pe o mance o ad e se in o ma ion ha hey hink may a ec ma ke pe o mance (Li, 2008). Li (2008) and De Souza e al. (2019), ind i ms wi h lesse ea nings end o epo complex inancial disclosu es. Acco ding o he MOH, he managemen is no neu al in p esen ing i m pe o mance in public disclosu es, which esul s in bias. R. J. Bloom ield (2002) inds ha manage- ial decisions a e some imes mo i a ed by an in en ion o make i ha de o he use s o unco e in o ma ion ha he manage s do no wan o e lec in he s ock p ices. Such ad e se in o ma ion includes; poo pe o mance, ea nings managemen , accoun ing auds, accoun ing manipula ions, e c., (Ajina e al., 2016; R. Bloom ield, 2008; C aig e al., 2013; Li, 2008; Lo e al., 2017; Sub amanian e al., 1993). The e o e, by in en ionally obscu ing inancial disclosu es, manage s aim o p e en he ad e se in o ma ion om being e lec ed in he i m’s s ock p ices o , in some ins ances, o delay i s inco po a ion in o s ock p ices (Li, 2008). In mos si ua ions, publishing eadable disclosu es makes all capi al ma ke pa icipan s be e o ; because hey equi e mo e cos ly in o ma ion in he absence o such public announcemen s (Diamond, 1985). Mo eo e , e ealing public in o ma ion educes in o ma ion asymme y (Diamond & Ve ecchia, 1991). Acco ding o Li (2008), he a ailabili y o public disclosu es is no enough o educe in o ma ion asymme y; because he in o ma ion p ocessing abili y is no he same o all use s (Indjejikian, 1991). Gi en ha he e exis a ia ions in expe ise ela ed o he Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 2 o 22 p ocessing o in o ma ion, inancial analys s and o he in o ma ion in e media ies a e able o de i e bene i om hei analysis o i ms by selling hei ecommenda ions and opinions o use s. Tha means public disclosu es wi h high eadabili y a e essen ial o educing in o ma ion asymme y. K ipke (1973), howe e , opines ha he p ima y use s o he in o ma ion om he inancial disclosu es should be he p o essionals like analys s and ins i u ional in es o s and no he unsophis ica ed “lay” in es o s. The unsophis ica ed in es o s migh no ha e he expe ise o comp ehend and unde s and he inancial disclosu es. Hence, he e o s o make he disclosu es eadable o a “lay” in es o a e a was e o money and ime. Ne e heless, since he pa icipa ion o unin o med in es o s is signi ican in he capi al ma ke , imp o ing in o ma ion anspa ency is essen ial o p o ec ing he in e es s o hose unin o med in es o s. The egula o s canno igno e hei in o ma ion needs. Acco ding o Jin & Mye s, (2006), weak in es o p o ec ion igh s and he opaqueness o in o ma ion mo e oge he . Poo in es o p o ec ion igh s gi e a chance o he companies o ob usca e ad e se in o ma ion like poo pe o mance and ailu es, which he man- agemen ea may ad e sely a ec he s ock p ices. As Li (2008) con i ms, inc eased eadabili y makes he ex ual con en mo e unde s andable and imp o es he in o ma i eness o he con en . Hence mo e eadable (less complex) disclosu es esul in highe eac ions om he s akeholde s (Rennekamp, 2012). Aldose i & Melegy, (2023) ound ha he e is a posi i e ela ionship be ween ARR and in o ma ion e iciency. Tha is o say, as ARR inc eases, in o ma ion asymme y dec eases, he in o ma ion en i onmen becomes mo e anspa en and inclusi e as in es o s a e able o ead & unde s and wi h less ime and be e comp ehension. This also educed he in o ma ion p ocessing cos s. As a esul , his in o ma ion symme y ge s e lec ed in s ock p ices leading o be e Synch onici y o a i m’s s ock p ice and he ma ke mo emen s as shown below in Figu e 1. This s udy aims o in es iga e he in luence o ARR on Synch onici y. Synch onici y, as de ined by Bai e al. (2019), ep esen s he p opo ion o a ia ion in an indi idual s ock e u n ha can be a ibu ed o ma ke e u ns. A high Synch onici y alue implies a s ong co ela ion be ween he s ock e u n and he ma ke e u n. Synch onici y In o ma ion en i onmen In o ma ion asymme y Annual epo eadabili y Figu e 1. Rela ionship be ween ARR and Synch onici y. Figu e 2. Concep ual amewo k. Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 3 o 22 The Indian capi al ma ke is an eme ging ma ke . This s udy aims o build upon he esea ch conduc ed by Bai e al. (2019) by explo ing he ela ionship be ween ARR and Synch onici y in he Indian capi al ma ke . The s udy acknowledges ha he indings o Bai e al. (2019) may no be gene alizable o all coun y se ings due o a ia ions in in es o p o ec ion, go e nance, and in o ma ion asymme y le els. The s udy also highligh s ha he e a e no speci ic egula ions in India go e ning he eadabili y o inancial disclosu es, and no p io esea ch has explo ed he associa ion be ween inancial disclosu e quali y and Synch onici y in he Indian con ex . The e o e, he s udy seeks o ill his esea ch gap and in es iga e he ela ionship be ween ARR and Synch onici y in he Indian capi al ma ke . In addi ion o examining he di ec ela ionship be ween ARR and Synch onici y, he s udy also aims o in es iga e he mode a ing e ec s o ins i u ional in es men , in o ma ion asymme- y, and analys s ollowing on his ela ionship. This app oach is use ul in unde s anding how hese ac o s may impac he ela ionship be ween ARR and Synch onici y in he Indian con ex . O e all, his s udy has he po en ial o con ibu e o he li e a u e on inancial disclosu e quali y and ma ke e iciency by p o iding insigh s in o he ela ionship be ween ARR and Synch onici y in he Indian capi al ma ke and he ac o s ha may mode a e his ela ionship. This pape uses Fog Index eadabili y sco e o measu e he ARR o NSE 500 i ms. The indings o he pape indica e a posi i e ela ionship be ween ARR and Synch onici y, signalling ha in India, as inancial disclosu es become mo e eadable, Synch onici y also imp o es due o highe ans- pa ency and imp o ed in o ma ion con en ha is a ailable o he in es o s. The imp o ed ma ke e iciency inc eases Synch onici y. Mo eo e , he posi i e ela ionship is mo e a enua ed o i ms wi h highe ins i u ional in es men , highe analys ollowing, and lowe in o ma ion asymme y. An enhancemen in ma ke e iciency leads o an inc ease in Synch onici y. The subsequen sec ions o he pape a e o ganized as ollows: Sec ion 2 p esen s he exis ing li e a u e e idence and hypo heses. Sec ion 3 p o ides in o ma ion on he da a and sample used. Sec ions 4 and 5 p esen he empi ical models and esul s, espec i ely. Finally, Sec ion 6 con- cludes he pape . 2. Li e a u e e iew and hypo hesis de elopmen This sec ion e iews he li e a u e on ARR and Synch onici y. Annual epo s p o ide a comp ehensi e accoun o a company’s inancial pe o mance o e he p eceding inancial yea . The anspa ency o such inancial disclosu es is di ec ly ela ed o Synch onici y. The quali y o he in o ma ion and he cos o p ocessing i can be de e mined by measu ing he eadabili y sco es o annual epo s (Li, 2008). In his s udy, he eadabili y sco es o he annual epo s se e as p oxies o he cos o in o ma ion p ocessing. Howe e , he e is limi ed e idence on he ela ionship be ween disclosu e eadabili y and Synch onici y, pa icula ly in he Indian con ex . Bai e al. (2019) ind a nega i e ela ion be ween ARR and Synch onici y in he US con ex . The pape posi s ha when he cos o in o ma ion p ocessing is low (as e lec ed by high ARR), in es o s a e able o u ilize he i m-speci ic in o ma ion ound in he annual epo s, which esul s in a dec ease in synch onici y. In ac , his esul canno be gene alised o all coun ies; because many o he ac o s like in es o p o ec ion egula ion, ype o in es o s in he ma ke , go e nance sys em, le el o in o ma ion asymme y, e c., which a ies ac oss ma ke s, in luence he Synch onici y o s ock e u n wi h he ma ke (Fa ooq & Ahmed, 2014; Jin & Mye s, 2006). The p ima y causes o ine ec i e co po a e go e nance sys ems in eme ging ma ke s include he dominance o amily con ol, inadequa e en o cemen o laws p o ec ing in es o s, and ine ec i e egula ions (Claessens & Fan, 2002; Khwaja & Mian, 2005). Mo eo e , Leuz e al. (2009) ind ha con olling sha es and managemen in eme ging ma ke s ob usca e ue in o ma ion om o he s akeholde s. Acco ding o Dasgup a e al. (2010) and Fa ooq & Ahmed, (2014), an imp o ed go e nance sys em leads o highe Synch onici y; because a good go e nance sys em necessi a es a be e Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 4 o 22 in o ma ion en i onmen and ma ke e iciency which leads o inc eased Synch onici y. Fa ooq & Ahmed, (2014), in hei s udy on he Indian capi al ma ke , used owne ship concen a ion, ope a- ional complexi y, and analys ollowing as p oxies o co po a e go e nance. The pape asse s ha high owne ship concen a ion leads o inadequa e in o ma ion disclosu e (Leuz e al., 2009), i ms wi h signi ican ope a ional complexi y expe ience mo e se e e agency p oblems and g ea e analys co e age p omo es a a o able in o ma ion en i onmen . The esea ch inds ha i ms wi h highe analys co e age, lowe owne ship concen a ion, and less ope a ional complexi y exhibi g ea e Synch onici y in India. Dasgup a e al. (2010) ind, “When he in o ma ion en i on- men o a i m imp o es, and mo e i m-speci ic in o ma ion is a ailable, ma ke pa icipan s a e able o imp o e hei p edic ions abou he occu ence o u u e i m-speci ic e en s. As a esul , he su p ise componen s o s ock e u ns will be lowe when he e en s a e ac ually disclosed, and he e u n Synch onici y will be highe .” In con as , Jin and Mye s (2006) ind ha Synch onici y will be highe o less anspa en companies (opaque ), and Synch onici y is highe when inancial sys ems a e less de eloped. Acco ding o Mo ck e al., (2000), compa ed o he de eloped coun ies, Synch onici y is highe in eme ging economies, and i is mainly due o he di e ence in p ope y igh s. Mo e p i a e in o ma ion will be capi alised in o he s ock p ices when he e is highe p o ec ion on public sha eholde s’ igh s agains co po a e inside s. Tha means ine icien p ope y igh s p o ec ion (poo e in es o p o ec ion) leads o high Synch onici y. N ow-Gyam i e al. (2015) ind ha ins i u ional in es o s can in luence a company’s in o ma ion disclosu e p ac ices. Since he ins i u ional in es o s a e la ge sha eholde s, he managemen will be cau ious abou sa is ying hese in es o s because he ac ions o ins i u ional in es o s migh s ongly in luence he ma ke . Mo eo e , ins i u ional in es o s a e la ge i ms ha usually ha e sys ems o closely moni o he i m and managemen ac i i ies (Le e al., 2006). Due o he igh egula ion on ins i u ional in es o s, he in o ma ion asymme y educes, which enhances he in o ma ion anspa ency and esul s in lowe Synch onici y in Ghana. As can be obse ed om he abo e e iew, he li e a u e p o ides mixed e idence on he associa ion be ween in o ma ion anspa ency and Synch onici y, bu all he s udies con i m he in o ma i eness o inancial disclosu e as an impo an de e minan o in o ma ion anspa ency, which u he leads o Synch onici y. The comp ehensibili y o inancial disclosu es has been a subjec o conce n o egula o s due o hei suspicions ega ding he anspa ency o such disclosu es. As public disclosu es a e in ended o he bene i o s akeholde s, i is impe a i e ha ma e ial in o ma ion is con eyed o hem. I he i ms in en ionally hide ad e se in o ma ion om he in es o s by making inancial disclosu es complex, hen he in es men made by common (unin o med) in es o s becomes meaningless. Only inside s and he mos sophis ica ed in es o s like inancial analys s and ins i u ional in es o s can make use o such cos ly, complex in o ma ion. The e o e, he anspa ency o in o ma i eness o inancial disclosu es is an impo an elemen o p o ec ing he in o ma ion needs o he in es o s; be e eadabili y indica es a be e in o ma ion en i onmen . Simila ly, Rennekamp (2012) inds ha inancial disclosu es wi h highe eadabili y lead o s onge eac ions om small in es o s. Mo eo e , ARR impac s in es o s’ eac ions o disclosed inancial in o ma ion. I also a ec s he in es o s’ decisions o depend on ou side sou ces o ob ain mo e in o ma ion (Sco Asay e al., 2017). The e a e ins ances whe e in es o s a e eluc an o in es in companies ha lack anspa ency. Law ence (2013) inds ha indi idual in es o s a e less likely o in es in i ms ha ha e complex annual epo s, as he in es o s lose con idence in a company when i s disclosu es a e no anspa en . The SEC o he US has made con inuous e o s o make he inancial disclosu es o publicly aded companies eadable. Acco ding o he plain English disclosu e egula ion, he companies adop ague o ma s and language in inancial disclosu es o hide ad e se in o ma ion om he s akeholde s. Mo eo e , he a e age in es o may no clea ly unde s and less eadable disclosu es, Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 5 o 22 esul ing in capi al ma ke ine iciency. Gene ally, he s udies on ARR con i m ha annual epo s a e complex and “being inaccessible o a la ge p opo ion o p i a e lay in es o s” (Jones & Shoemake , 1994). Li (2008)sugges s ha one po en ial mo i a ion o managemen o make annual epo s less eadable may be o delay he in eg a ion o nega i e in o ma ion in o s ock p ices. This is because he s ock ma ke ends o unde - eac o he na a i e con en o annual epo s. Annual epo s ep esen a c ucial means h ough which s akeholde s acqui e i m-speci ic in o ma ion. This s udy aims o explo e he associa ion be ween ARR (a subs i u e o he cos o i m-speci ic in o ma ion p ocessing) and Synch onici y. We use Synch onici y as a p oxy o measu ing he u iliza ion o in o ma ion (Bai e al., 2019). Leha y e al. (2011) es ablish ha he eadabili y o inancial disclosu es can se e as a measu e o he cos incu ed by s akeholde s o in e p e , p ocess and comp ehend he ex ual con en . Tha means he lesse he eadabili y, he highe will be he di icul ies o he s akeholde s o p ocess and unde s and he disclosu es; because i equi es he use s o pay mo e a en ion, e o , and ime in ex ac ing and comp e- hending he mos ele an in o ma ion (R. J. Bloom ield, 2002). When in o ma ion ga he ing o p ocessing cos is high (lesse eadabili y), he unin o med in es o s use he s ock p ice mo e- men s as an in o ma ion sou ce and make decisions. Following Li (2008) and Fa ooq & Ahmed (2014), we hope ha imp o ing he ARR will inc ease in o ma ion anspa ency and ul ima ely lead o highe Synch onici y. Wi h his p emise, ou i s hypo hesis is s a ed as ollows; H1: Companies wi h high ARR ha e highe Synch onici y. I is o be no ed ha he hypo hesis de eloped he e is in con as wi h he indings o (Bai e al., 2019) as o an eme ging ma ke like India which is semi-s ong o m is in o ma ionally e icien and a sample consis ing o highe sophis ica ed in es o s. G ossman and S igli z (1980) opined ha he cos o analysing da a mus equa e he e u n o analyse da a in an e icien ma ke , he lack o which shall subop imal le el o in es o s analysing da a and esul ing in mean e e sion o he e u ns. Fu he , Boubake e al., (2019) no ed a nega i e ela ionship be ween ARR and s ock liquidi y, meaning ha complex ARR makes hose i m’s s ock una ac i e and a e less aded. The e o e, as ARR inc eases, in o ma ion asymme y dec eases, he in o ma ion en i onmen becomes mo e anspa en and inclusi e as in es o s a e able o ead & unde s and wi h less ime and be e comp ehension. This also educes he in o ma ion p ocessing cos s and hey also become e y liquid. As a esul , his in o ma ion symme y ge s e lec ed in s ock p ices leading o be e Synch onici y. The deg ee o which s ock p ices accu a ely e lec in o ma ion o he e iciency o he p ice sys em is con ingen on he p opo ion o knowledgeable in es o s in he ma ke . When he p opo ion o sophis ica ed in es o s is high, he p ice sys em mo e e icien ly ansmi s publicly a ailable in o ma ion om in o med in es o s o unin o med in es o s (G ossman & S igli z, 1980). N ow- Gyam i e al. (2015) ind ha close moni o ing by ins i u ional in es o s helps in educing in o ma- ion asymme y and imp o es he in o ma ion en i onmen . Hence he second hypo hesis is s a ed as ollows; H2: The posi i e associa ion be ween ARR and Synch onici y is mo e p onounced o i ms wi h g ea e le els o ins i u ional in es men s. The p esence o a g ea e p opo ion o knowledgeable in es o s in he ma ke enhances he in o ma ion en i onmen and hus, educes in o ma ion asymme y. This suppo s he indings o Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 6 o 22 N ow-Gyam i e al. (2015) ha an inc ease in ins i u ional in es men educes in o ma ion asym- me y, we also hypo hesise ha ; H3: The posi i e associa ion be ween ARR and Synch onici y is mo e p onounced o i ms wi h educed in o ma ion asymme y. Analys s a e he in o ma ion in e media ies who do independen e alua ions and assessmen s abou i m pe o mance, and hey go beyond he in o ma ion gi en in he company disclosu es o upg ade hei ecommenda ions. Analys s collec , analyse, in e p e and dissemina e p i a e and public in o ma ion o he s akeholde s (Fa ooq & Ahmed, 2014; Michaely & Womack, 1999) . As a esul , he exis ence o analys s diminishes in o ma ion asymme y by p o iding aluable in o - ma ion o capi al ma ke pa icipan s. Analys s imp o e he in o ma ion en i onmen and make s ock p ices mo e in o ma i e, hus esul ing in an inc ease in Synch onici y (Chan & Hameed, 2006; Fa ooq & Ahmed, 2014). Fu he mo e, as he e iciency o s ock p ices imp o es, s ock p ice ola ili y dec eases, and Synch onici y is enhanced (Aye s e al., 2003). This leads o ou nex hypo hesis ha ; H4: The posi i e associa ion be ween ARR and Synch onici y is mo e p onounced o i ms wi h high analys ollowing. This pape aims o ex end he li e a u e using he sample om an eme ging ma ke , i.e., India, by ocusing on he ela ionship be ween ARR and Synch onici y. Mo eo e , his pape also checks wha happens o he ela ionship be ween ARR and Synch onici y unde di e en ma ke condi- ions. To do his, he sample is di ided in o subg oups based on ins i u ional in es men (as p oxied by he p opo ion o ins i u ional in es men ), in o ma ion asymme y (as p oxied by bid-ask sp ead), and analys co e age (measu ed by he o al numbe o analys s issuing ecommenda- ions). I his pape inds a ela ionship be ween ARR and Synch onici y, we can conclude ha di ec ly o indi ec ly, ARR is ac o ed in o he ma ke . The esul s o he pape a e belie ed o help in es o s and manage s o unde s and how i al disclosu e eadabili y is o ensu e Synch onici y and he eby ma ke e iciency. In an e icien ma ke condi ion, s ock p ices become mo e in o ma i e. The indings also indica e ha he managemen should be mo e cau ious abou he disclosu e eadabili y i hei i ms ha e lowe ins i u ional in es men s, highe in o ma ion asymme y and lowe analys ollowing. 3. Da a This sec ion documen s he de ails o he sample, he calcula ion o Synch onici y and he calcula ion o a ious p oxies o measu ing he eadabili y. 3.1. Sample To in es iga e he ela ionship be ween ARR and Synch onici y, we conside annual epo s o Indian i ms (NSE 500 i ms) o he pe iod 2015–16 o 2019–20. NSE 500 is India’s i s b oad ma ke index, and he companies included in he lis a e he op 500 i ms selec ed acco ding o he ma ke capi alisa ion om he eligible uni e se. I has ep esen a ion om all indus ies. Since he ca ego isa ion is based on ma ke capi alisa ion, hey a e he ac i ely aded o moni o ed s ocks in he ma ke . Ac i ely aded companies a e mo e anspa en han hinly aded o small i ms (Jin & Mye s, 2006). Hence in his s udy, we conside NSE 500 companies o he analysis. Fu he , we conside he pe iod 2015–2019 because om 2016, India has con e ged in o a new accoun ing s anda d, Ind AS. Ind AS was in oduced in a phased manne . Almos all he companies in he sample ha e ei he olun a ily adop ed he new s anda d o come unde he i s ba ch o manda o y adop ion. Al hough we a e no conce ned abou he e ec o Ind AS on annual epo Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 7 o 22 in o ma ion a ailable, ma ke pa icipan s can make mo e accu a e p edic ions abou u u e e en s, which educes he su p ise componen o s ock e u ns and inc eases Synch onici y. By enhancing he eadabili y o annual epo s, mo e i m-speci ic in o ma ion becomes a ailable o he public, which e lec s he quali y o he in o ma ion en i onmen and ul ima ely leads o highe Synch onici y. 5.6. Add essing endogenei y: Two-s age eg ession The empi ical indings show a posi i e associa ion be ween ARR and Synch onici y. The eadabili y o he disclosu es can be delibe a ely chosen o a ec in es o pe cep ions abou he i m pe o mance. Managemen oppo unism heo y indica es ha managemen has incen i es while hiding ac ual pe o mance when he i m’s pe o mance is weak (Bai e al., 2019). So ha manage- men can use disclosu e eadabili y s a egically o ob usca e he i m pe o mance (Li, 2008). Mo eo e , Li (2008) also inds some i m-le el cha ac e is ics like i m age, size, MTB e c., ha may a ec ARR; some o such ac o s can also a ec Synch onici y. In o de o ensu e ha he esul s o he main analysis a e no a ec ed by po en ial endogenei y issues ela ed o ce ain ac o s, his pape employs a “ wo-s age eg ession” analysis echnique, as p oposed by Bai e al. (2019). This app oach aims o p o ide a mo e obus es ima e o he ela ionship be ween ARR and Synch onici y, by con olling o any po en ial con ounding a iables. Following Li (2008), he i s model, Equa ion (7), is a de e minan model o eadabili y ha es ablishes he ela ionship o he Fog index wi h i s de e minan s. Table 4. Condi ioning e ec s o ins i u ional in es men s Ins i u ional in es men High Low (1) (2) VARIABLES Synch onici y Synch onici y L. Fog −0.013*** −0.008 (0.005) (0.007) L. ROA 0.007 0.011* (0.005) (0.006) L. Le e age −0.818 −0.460 (0.747) (0.445) L. MTB −0.038 −0.043 (0.053) (0.037) L. LME −1.409*** −1.634*** (0.351) (0.199) L. Volume 0.018 −0.068 (0.062) (0.083) Cons an 8.171*** 7.660*** (1.605) (0.999) Obse a ions 560 589 Numbe o CO_ID 163 165 R-squa ed 0.356 0.359 Yea FE Yes Yes Sou ce: P epa ed by au ho s No e: Robus s anda d e o s in pa en heses ***p<0.01, **p<0.05, *p<0.1 Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 14 o 22 Fogi; =Flesch Kincaidi; ¼α0þβ1Agei; þβ2Sizei; þβ3Business segmen si; þβ4Vola ili y o ea ningsi; þβ5Vola ili y o e u nsi; þβ6MTBi; þβ7Audi o quali yi; þβ8Tobin0s Qi; þεi; (7) He e, he eadabili y o inancial disclosu es is measu ed by he Fog and Flesch Kincaid indices. The age o he company, size, numbe o business segmen s, ola ili y o e u ns, ma ke - o-book a io, audi o quali y, and Tobin’s Q a e con olled o in he analysis. The ola ili y o e u ns is calcula ed as he s anda d de ia ion o he Ea nings Be o e In e es and Taxes (EBIT) o e he pas i e yea s. The Ma ke - o-Book (MTB) a io is he a io o he ma ke alue o equi y o he book alue o equi y. The audi o quali y is indica ed by whe he he company’s audi o is one o he “Big 4” i ms, and Tobin’s Q is a measu e o i m pe o mance calcula ed as he a io o he sum o he MV o equi y and BV o o al asse s minus BV o equi y di ided by o al asse s. Then in he nex s age, he p edic ed esiduals om es ima ing Equa ion (7) o Fog and Flesch Kincaid index espec i ely aken and enamed as “Residual Fog” and “Residual Flesch” and he e- a e used o e-es ima e, eplacing he o iginal alues o he same in Equa ions (5) and (6). The esul s o he es ima ion, as p esen ed in Table 7, indica e ha he e is a nega i e associa- ion be ween he esiduals o he Fog and Flesch Kincaid indexes (which se e as p oxies o he eadabili y o inancial disclosu es) and Synch onici y. Fu he mo e, he coe icien s on hese esiduals a e bo h nega i e and s a is ically signi ican a he 5% le el. These indings sugges ha e en when con olling o po en ial endogenei y issues, he ela ionship be ween he ead- abili y o inancial disclosu es and Synch onici y emains consis en . Table 5. Condi ioning e ec s o in o ma ion asymme y In o ma ion asymme y High Low (1) (2) VARIABLES Synch onici y Synch onici y L. Fog 0.002 −0.018** (0.005) (0.007) L. ROA 0.011 0.010** (0.009) (0.004) L. Le e age −0.223 −0.289 (0.750) (0.323) L. MTB −0.016 −0.105* (0.032) (0.057) L. LME −2.141*** −1.101*** (0.310) (0.317) L. Volume 0.133 0.042 (0.075) (0.083) Cons an 9.136*** 6.598*** (1.626) (1.631) Obse a ions 547 529 Numbe o CO_ID 153 154 R-squa ed 0.399 0.267 Yea FE Yes Yes Sou ce: P epa ed by au ho s No e: Robus s anda d e o s in pa en heses ***p<0.01, **p<0.05, *p<0.1 Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 15 o 22 6. Conclusion Financial decision-make s ace di icul ies in aking inancial decisions due o he ac o s like a less anspa en in o ma ion en i onmen , highe in o ma ion asymme y e c. Mo eo e , he manage- men some imes in en ionally makes he inancial disclosu es less eadable o hide nega i e in o ma ion om he s akeholde s. The in o ma ion p ocessing cos inc eases as he eadabili y educe. The e o e, in his pape , we a e in e es ed in examining he ela ionship be ween ARR and Synch onici y in he Indian con ex o he pe iod 2015–16 o 2019–20. In con as o Bai e al. (2019), his pape inds a posi i e ela ionship be ween ARR and u u e Synch onici y (suppo s Hypo hesis 1). As he annual epo becomes mo e eadable, he in o ma- ion en i onmen becomes mo e anspa en , and in o ma ion asymme y educes, he amoun o publicly a ailable in o ma ion inc eases; as a esul , Synch onici y also inc eases. On he o he hand, when he annual epo s a e less eadable, only sophis ica ed in es o s will be able o unde s and and e lec he in o ma ion in he s ock p ices. A he same ime, he unin o med in es o s will be aking he decision based on he publicly a ailable in o ma ion; hence Synch onici y educes. As Li (2008) inds, annual epo s published wi h less eadabili y help he managemen o delay ad e se in o ma ion in o s ock p ices. Acco ding o he li e a u e, bo h in o ma ion anspa ency (Fa ooq & Ahmed, 2014) and opa- queness (Jin & Mye s, 2006) can cause Synch onici y. When he disclosu es a e opaque, none o he s akeholde s can bene i om i m-speci ic in o ma ion because such in o ma ion is no a ailable; hence he s akeholde s use s ock p ice luc ua ions as an in o ma ion sou ce and Synch onici y dec eases. When he i ms a e mo e anspa en , all he s akeholde s use he Table 6. Condi ioning e ec s o analys ollowing Analys ollowing High Low (1) (2) VARIABLES Synch onici y Synch onici y L. Fog −0.010* −0.009 (0.005) (0.007) L. ROA 0.004 0.002 (0.010) (0.005) L. Le e age −0.454 −0.517 (0.714) (0.575) L. MTB −0.078* 0.008 (0.040) (0.021) L. LME −1.336*** −1.672*** (0.256) (0.322) L. Volume −0.030 0.085 (0.077) (0.060) Cons an 7.923*** 7.183*** (1.246) (1.463) Obse a ions 695 584 Numbe o CO_ID 198 166 R-squa ed 0.368 0.320 Yea FE Yes Yes Sou ce: P epa ed by au ho s No e: Robus s anda d e o s in pa en heses ***p<0.01, **p<0.05, *p<0.1 Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 16 o 22 a ailable in o ma ion, so Synch onici y inc eases. The median Fog index o he sample is 34.6, which deno es ha he sample i ms a e no highly anspa en o opaque in public disclosu es. On a e age, he i m in he sample publishes eadable annual epo s. Hence, we canno conclude ha he opaque na u e o he disclosu e p ac ices is he only eason o high Synch onici y. Table 7. Two-s age eg ession analysis 1 s S age Reg ession 2 nd S age Reg ession (1) (2) (3) (4) VARIABLES Fog Flesch Kincaid Synch onici y Synch onici y Residual Fog −0.011** (0.005) Residual Flesch −0.004** (0.002) Age 0.234 0.538 (0.181) (0.736) Business Segmen s - - Size 1.590** 1.937* (0.639) (1.113) Audi o Quali y - - MTB 1.018*** 1.628*** (0.128) (0.241) Vola ili y o ea nings 0.000 0.000 (0.000) (0.000) Vola ili y o e u ns 0.234 1.060 (0.292) (1.092) Tobin’s Q −1.398*** −2.180*** (0.114) (0.214) L. ROA 0.017** 0.014* (0.007) (0.007) L. Le e age −0.055 −0.214 (0.405) (0.481) L. MTB −0.058 −0.015 (0.040) (0.033) L. LME −2.059*** −2.207*** (0.349) (0.366) L. Volume 0.018 −0.033 (0.090) (0.084) Cons an 8.376 30.968 9.968*** 11.000*** (10.704) (35.312) (1.414) (1.473) Obse a ions 1,045 944 841 756 Numbe o CO_ID 242 224 240 223 R-squa ed 0.097 0.449 0.317 0.306 Yea FE Yes Yes Yes Yes Sou ce: P epa ed by au ho s No e: Robus s anda d e o s in pa en heses ***p<0.01, **p<0.05, *p<0.1 Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 17 o 22 Fu he , we ind ha in he Indian con ex , he p opo ion o sophis ica ed in es o s (like ins i u ional in es o s) is high. To check whe he he ela ionship be ween ARR and Synch onici y changes wi h he changes in ins i u ional in es men , in o ma ion asymme y, and analys ollow- ing, we classi ied he sample in o wo subg oups based on he median ins i u ional in es men , in o ma ion asymme y, and analys ollowing. The indings indica e ha he posi i e ela ionship be ween ARR and u u e Synch onici y is mo e p onounced o he i ms wi h highe ins i u ional in es men (suppo s Hypo hesis 2), lowe in o ma ion asymme y (suppo s Hypo hesis 3), and highe analys ollowing (suppo s Hypo hesis 4). The esul s a e obus when we add ess he po en ial endogenei y issue suspec ed on eadabili y. The eby we p o e ha he inc eased Synch onici y in he sample is due o he imp o ed in o ma ion anspa ency in he ma ke . When he ARR is highe , bo h he in o med and unin o med in es o s in he ma ke make use o he in o ma ion, and as a esul , all he a ailable in o ma ion easily ge s inco po a ed in o he s ock p ices and hence Synch onici y inc eases. Since he p opo ion o sophis ica ed in es o s is highe in he Indian capi al ma ke when he annual epo s a e less eadable, only he sophis i- ca ed in es o s in he ma ke can inco po a e such in o ma ion in he s ock p ices, and as a esul , Synch onici y dec eases. The esul s o he pape help in unde s anding how he in o ma i eness o he annual epo s (measu ed ia he ARR) a ec s Synch onici y in an eme ging ma ke like India. Fu he , he indings also indica e how eadabili y con ibu es o a be e in o ma ion en i onmen . To a g ea ex en , he in o ma i eness o he annual epo s helps educe he su p ise componen in he u u e. The highe he ARR, he be e he in o ma ion anspa ency, he lowe he in o ma- ion asymme y, he be e he in o ma ion en i onmen , which esul s in highe Synch onici y. We also ind ha he esul s may change acco ding o he a ia ion in he p opo ion o ins i u ional in es men , analys ollowing and in o ma ion asymme y in he capi al ma ke . The indings o he pape will be help ul o he in es o s and he managemen o unde s and how i al disclosu e eadabili y is o achie e be e ma ke e iciency. Be e Synch onici y indica es mo e e icien ma ke condi ions and in o ma ionally e icien p ice mo emen s. Hence unde an e icien ma ke condi ion, in es o s can use p ice luc ua ions as an in o ma ion sou ce o make decisions. The indings also indica e ha he managemen should be mo e cau ious abou he disclosu e ead- abili y i hei i ms ha e lowe ins i u ional in es men s, highe in o ma ion asymme y and lowe analys ollowing. Funding The au ho s ecei ed no di ec unding o his esea ch. Au ho de ails Vismaya Gangadha an 1 E-mail: [email p o ec ed] Lakshmi Padmakuma i 1 1 Finance and Accoun ing a ea, IFMR GSB, K ea Uni e si y, S ici y, India. Disclosu e s a emen No po en ial con lic o in e es was epo ed by he au ho (s). Ci a ion in o ma ion Ci e his a icle as: Annual epo eadabili y and s ock e u n synch onici y: E idence om India 1 , Vismaya Gangadha an & Lakshmi Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034. No es 1. The pape has been p esen ed a he Resea ch Symposium on Finance and Economics 2022, K ea Uni e si y, India, and he Wo ld Finance Con e ence 2022, Uni e si y o Tu in, I aly. The commen s and sugges ions o he discussan s and pa icipan s a e inco po a ed in o he d a . 2. h ps://co po a e inanceins i u e.com/ esou ces/knowl edge/o he / og-index/ 3. Bid-ask sp ead da a downloaded om Bloombe g (i is he a e age o all he bid/ask sp ead). Re e ences Ajina, A., Laoui i, M., & Msolli, B. (2016). Guiding h ough he Fog: Does annual epo eadabili y e eal ea n- ings managemen ? Resea ch in In e na ional Business and Finance (), 38, 509–516. h ps://doi.o g/10.1016/j. iba .2016.07.021 Aldose i, M. M., & Melegy, M. M. A. (2023). Readabili y o annual inancial epo s, in o ma ion e iciency, and s ock liquidi y: P ac ical guides om he Saudi busi- ness en i onmen . In o ma ion Sciences Le e s, 12 (2), 813–821. h ps://doi.o g/10.18576/isl/120223 Amihud, Y., & Mendelson, H. (1986). Asse p icing and he Bid-ask sp ead. Jou nal o Financial Economics, 17(2), 223–249. h ps://doi.o g/10.1016/0304-405X(86) Aye s, B. C., Tull, J. M., & F eeman, R. N. (2003). E idence ha Analys Following and Ins i u ional Owne ship Accele a e he P icing o Fu u e Ea nings. Re iew o Accoun ing S udies, 8. Bai, X., Dong, Y., & Hu, N. (2019). Financial epo ead- abili y and s ock e u n synch onici y. Applied Economics, 51(4), 346–363. h ps://doi.o g/10.1080/ 00036846.2018.1495824 Bloom ield, R. J. (2002). The “Incomple e Re ela ion Hypo hesis” and Financial Repo ing. SSRN Elec onic Jou nal. h ps://doi.o g/10.2139/SSRN.312671 Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 18 o 22 Bloom ield, R. (2008). Discussion o “Annual epo eadabil- i y, cu en ea nings, and ea nings pe sis ence.” Jou nal o Accoun ing and Economics, 45(2–3), 248–252. h ps://doi.o g/10.1016/J.JACCECO.2008.04.002 Boubake , S., Gounopoulos, D., & Rjiba, H. (2019). Annual epo eadabili y and s ock liquidi y. Financial Ma ke s, Ins i u ions & Ins umen s, 28(2), 159–186. h ps://doi.o g/10.1111/FMII.12110 Callen, J. L., Khan, M., & Lu, H. (2013). Accoun ing quali y, s ock p ice delay, and u u e s ock e u ns. Con empo a y Accoun ing Resea ch, 30(1), 269–295. h ps://doi.o g/10.1111/j.1911-3846. 2011.01154.x Chan, K., & Hameed, A. (2006). S ock p ice synch onici y and analys co e age in eme ging ma ke s. Jou nal o Financial Economics, 80(1), 115–147. h ps://doi. o g/10.1016/j.j ineco.2005.03.010 Cheng, J., Zhao, J., Xu, C., & Gong, H. (2018). Annual epo eadabili y and ea nings managemen : E idence om Chinese Lis ed Companies. Ad ances in Social Science, Educa ion and Humani ies Resea ch. h ps://doi.o g/ 10.2991/ICSSHE-18.2018.199 Claessens, S., & Fan, J. P. H. (2002). Co po a e Go e nance in Asia: A Su ey. In e na ional Re iew o Finance, 3(2), 71–103. h ps://doi.o g/10.1111/1468-2443.00034 C aig, R., Mo ensen, T., & Iye , S. (2013). Explo ing Top Managemen Language o Signals o Possible Decep ion: The Wo ds o Sa yam’s Chai Ramalinga Raju. Jou nal o Business E hics, 113(2), 333–347. h ps://doi.o g/10.1007/s10551-012- 1307-5 Dasgup a, S., Gan, J., & Gao, N. (2010). T anspa ency, p ice in o ma i eness, and s ock e u n synch onici y: Theo y and e idence. Jou nal o Financial and Quan i a i e Analysis, 45(5), 1189–1220. h ps://doi. o g/10.1017/S0022109010000505 de Souza, J. A. S., Rissa i, J. C., Ro e , S., & Bo ba, J. A. (2019). The linguis ic complexi ies o na a i e accoun ing disclosu e on inancial s a emen s: An analysis based on eadabili y cha ac e is ics. Resea ch in In e na ional Business and Finance, 48, 59–74. h ps://doi.o g/10.1016/j. iba .2018.12.008 Diamond, D. W. (1985). Op imal Release o In o ma ion By Fi ms. The Jou nal o Finance, 40 (4), 1071–1094. h ps://doi.o g/10.1111/j.1540- 6261.1985. b02364.x Diamond, D. W., & Ve ecchia, R. E. (1991). Disclosu e, Liquidi y, and he Cos o Capi al. The Jou nal o Finance, 46(4), 1325–1359. h ps://doi.o g/10.1111/j. 1540-6261.1991. b04620.x Du ne , A., Mo ck, R., Yeung, B., & Za owin, P. (2003). Does g ea e i m-speci ic e u n a ia ion mean mo e o Less in o med s ock p icing? Jou nal o Accoun ing Resea ch, 41(5), 797–836. h ps://doi.o g/10.1046/J. 1475-679X.2003.00124.X E ug ul, M., Lei, J., Qiu, J., & Wan, C. (2017). Annual Repo Readabili y, Tone Ambigui y, and he Cos o Bo owing. Jou nal o Financial and Quan i a i e Analysis, 52(2), 811–836. h ps://doi.o g/10.1017/ S0022109017000187 Fa ooq, O., & Ahmed, S. (2014). S ock p ice synch onici y and co po a e go e nance mechanisms: E idence om an eme ging ma ke . In . J. Accoun ing, Audi ing and Pe o mance E alua ion, 10(4), 4. h ps://doi.o g/ 10.1504/IJAAPE.2014.066392 Fa ooq, O., & Hamouda, M. (2016). S ock p ice syn- ch onici y and in o ma ion disclosu e: E idence om an eme ging ma ke . Finance Resea ch Le e s, 18, 250–254. h ps://doi.o g/10.1016/j. l. 2016.04.024 G ossman, S. J., & S igli z, J. E. (1980). On he Impossibili y o In o ma ionally E icien Ma ke s on JSTOR. The Ame ican Economic Re iew, 70(3), 393–408. h ps://www.js o .o g/s able/1805228 Indjejikian, R. J. (1991). The impac o cos ly in o ma ion in e p e a ion on i m disclosu e decisions. Jou nal o Accoun ing Resea ch, 29(2), 301. h ps://doi.o g/10. 2307/2491050 Jin, L., & Mye s, S. C. (2006). R2 a ound he wo ld: New heo y and new es s. Jou nal o Financial Economics, 79(2), 257–292. h ps://doi.o g/10.1016/j.j ineco. 2004.11.003 Jones, M. J., & Shoemake , P. A. (1994). Accoun ing na a i es: A e iew o empi ical s udies o con en and eadabili y - P oQues . Jou nal o Accoun ing Li e a u e, 13, 142. h ps://www.p oques .com/doc iew/216304635?pq-o igsi e=gschola & omopen iew= ue Khwaja, A. I., & Mian, A. (2005). Unchecked in e medi- a ies: P ice manipula ion in an eme ging s ock ma ke . Jou nal o Financial Economics, 78(1), 203–241. h ps://doi.o g/10.1016/j.j ineco.2004.06. 014 Kim, J. B., & Shi, H. (2012). IFRS epo ing, i m-speci ic in o ma ion lows, and ins i u ional en i onmen s: In e na ional e idence. Re iew o Accoun ing S udies, 17(3), 474–517. h ps://doi.o g/10.1007/s11142-012- 9190-y Kla e, G. R. (2000). The Measu emen o Readabili y: Use ul In o ma ion o Communica o s. ACM Jou nal o Compu e , 24, 3. K ipke, H. (1973). The My h o he In o med Layman on JSTOR. The Business Lawye , 28(2), 631–638. h ps:// www.js o .o g/s able/40685124 Laksmana, I., Tie z, W., & Yang, Y. W. (2012). Compensa ion discussion and analysis (CD&A): Readabili y and managemen ob usca ion. Jou nal o Accoun ing and Public Policy, 31(2), 185–203. h ps://doi.o g/10.1016/J.JACCPUBPOL.2011.08.003 Law ence, A. (2013). Indi idual in es o s and inancial disclosu e. Jou nal o Accoun ing and Economics, 56 (1), 130–147. h ps://doi.o g/10.1016/j.jacceco. 2013.05.001 Leha y, R., Li, F., & Me kley, K. (2011). The E ec o Annual Repo Readabili y on Analys Following and he P ope ies o Thei Ea nings Fo ecas s. The Accoun ing Re iew, 86(3), 1087–1115. h ps://doi.o g/10.2308/ ACCR.00000043 Leuz, C., Lins, K., & Wa nock, F. E. (2009). Do o eigne s in es less in poo ly go e ned i ms. Re iew o Financial S udies, 22(8), 3245–3285. h ps://doi.o g/ 10.1093/ s/hhn089 Le, S. A., Wal e s, B., & K oll, M. (2006). The mode a ing e ec s o ex e nal moni o s on he ela ionship be ween R&D spending and i m pe o mance. Jou nal o Business Resea ch, 59(2), 278–287. h ps:// doi.o g/10.1016/j.jbus es.2005.04.003 Li, F. (2008). Annual epo eadabili y, cu en ea nings, and ea nings pe sis ence. Jou nal o Accoun ing and Economics, 45(2–3), 221–247. h ps://doi.o g/10. 1016/J.JACCECO.2008.02.003 Lo, K., Ramos, F., & Rogo, R. (2017). Ea nings managemen and annual epo eadabili y. Jou nal o Accoun ing and Economics, 63(1), 1–25. h ps://doi.o g/10.1016/ J.JACCECO.2016.09.002 Michaely, R., & Womack, K. L. (1999). Con lic o In e es and he C edibili y o Unde w i e Analys Recommenda ions. The Re iew o Financial S udies, 12(4), 653–686. h ps://doi.o g/10.1093/ RFS/12.4.653 Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 19 o 22 Mo ck, R., Yeung, B., & Yu, W. (2000). The in o ma ion con en o s ock ma ke s: Why do eme ging ma ke s ha e synch onous s ock p ice mo emen s? Jou nal o Financial Economics, 58(1–2), 215–260. h ps://doi. o g/10.1016/S0304-405X(00) N ow-Gyam i, M., Bokpin, G. A., & Gemegah, A. (2015). Co po a e go e nance and anspa ency: E idence om s ock e u n synch onici y. Jou nal o Financial Economic Policy, 7(2), 157–179. h ps://doi.o g/10. 1108/JFEP-10-2013-0055 Pio oski, J. D., & Rouls one, D. T. (2004). The In luence o Analys s, Ins i u ional In es o s, and Inside s on he Inco po a ion o Ma ke , Indus y, and Fi m-Speci ic In o ma ion in o S ock P ices. The Accoun ing Re iew, 79 (4), 1119–1151. h ps://doi.o g/10.2308/ACCR.2004.79. 4.1119 Rennekamp, K. (2012). P ocessing Fluency and In es o s’ Reac ions o Disclosu e Readabili y. Jou nal o Accoun ing Resea ch, 50(5), 1319–1354. h ps://doi. o g/10.1111/j.1475-679X.2012.00460.x Sco Asay, H., B ooke Ellio , W., & Rennekamp, K. (2017). Disclosu e Readabili y and he Sensi i i y o In es o s’ Valua ion Judgmen s o Ou side In o ma ion. The Accoun ing Re iew, 92(4), 1–25. h ps://doi.o g/10.2308/ACCR-51570 Sub amanian, R., Insley, R. G., & Blackwell, R. D. (1993). Pe o mance and Readabili y: A Compa ison o Annual Repo s o P o i able and Unp o i able Co po a ions. In e na ional Jou nal o Business Communica ion, 30(1), 49–61. h ps://doi.o g/10. 1177/002194369303000103 Thomas, S. (2002). Fi m di e si ica ion and asymme ic in o ma ion: E idence om analys s’ o ecas s and ea nings announcemen s $. Jou nal o Financial Economics, 64. h ps://doi.o g/10.1016/S0304-405X (02)00129-0 Xu, H., Pham, T. H., & Dao, M. (2020). Annual epo ead- abili y and ade c edi . Re iew o Accoun ing and Finance, 19(3), 363–385. h ps://doi.o g/10.1108/RAF- 10-2019-0221/FULL/XML Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 20 o 22 Appendix I In o ma ion asymme y, ins i u ional in es men , analys co e age and Synch onici y This sec ion shows he ela ionship o in o ma ion asymme y, ins i u ional in es men , analys ollowing wi h Synch onici y. Table A1 shows a posi i e and signi ican ela ionship be ween ins i u ional in es men , analys ollowing and Synch onici y, which con i ms he esul s o exis ing li e a u e (Fa ooq & Ahmed, ; N ow-Gyam i e al., 2015). The di ec ion o he ela ionship be ween in o ma ion asymme y and Synch onici y is nega i e bu no s a is ically signi ican . Table A1. In o ma ion asymme y, ins i u ional in es men , analys co e age and s ock e u n Synch onici y (1) VARIABLES Synch onici y L. Fog −0.007* (0.004) L. Asymme y −0.001 (0.005) L. Ins i u ional in es men 0.005** (0.002) L. Analys ollowing 0.462** (0.209) L. ROA 0.010* (0.005) L. Le e age −0.357 (0.518) L. MTB −0.037 (0.038) L. LME −1.981*** (0.303) L. Volume 0.029 (0.073) Cons an 9.162*** (1.134) Obse a ions 1,189 R-squa ed 0.320 Numbe o CO_ID 345 Yea FE Yes Sou ce: P epa ed by au ho s No e: Robus s anda d e o s in pa en heses ***p<0.01, **p<0.05, *p<0.1 Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 21 o 22 © 2023 The Au ho (s). This open access a icle is dis ibu ed unde a C ea i e Commons A ibu ion (CC-BY) 4.0 license. You a e ee o: Sha e — copy and edis ibu e he ma e ial in any medium o o ma . Adap — emix, ans o m, and build upon he ma e ial o any pu pose, e en comme cially. The licenso canno e oke hese eedoms as long as you ollow he license e ms. Unde he ollowing e ms: A ibu ion — You mus gi e app op ia e c edi , p o ide a link o he license, and indica e i changes we e made. You may do so in any easonable manne , bu no in any way ha sugges s he licenso endo ses you o you use. No addi ional es ic ions You may no apply legal e ms o echnological measu es ha legally es ic o he s om doing any hing he license pe mi s. Cogen Economics & Finance (ISSN: 2332-2039) is published by Cogen OA, pa o Taylo & F ancis G oup. Publishing wi h Cogen OA ensu es: • Immedia e, uni e sal access o you a icle on publica ion • High isibili y and disco e abili y ia he Cogen OA websi e as well as Taylo & F ancis Online • Download and ci a ion s a is ics o you a icle • Rapid online publica ion • Inpu om, and dialog wi h, expe edi o s and edi o ial boa ds • Re en ion o ull copy igh o you a icle • Gua an eed legacy p ese a ion o you a icle • Discoun s and wai e s o au ho s in de eloping egions Submi you manusc ip o a Cogen OA jou nal a www.Cogen OA.com Gangadha an & Padmakuma i, Cogen Economics & Finance (2023), 11: 2186034 h ps://doi.o g/10.1080/23322039.2023.2186034 Page 22 o 22