Readability of chairman's statement in Singapore.

• Main Authors: Goh, Eng Yang., Lim, Poh Chen., Wee, Kian Seng.
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Business::Accounting
• Online Access: http://hdl.handle.net/10356/51944
• Institution: Nanyang Technological University

Investors and shareholders typically look at chairman’s statements in order to obtain valuable information about the performance and prospects of the companies. This is because majority of them do not have the time or the expertise to read detailed financial statements such as Balance Sheets or Profit and Loss statements. Hence, it is important that chairman’s statements are written in a form that is readable and understandable by majority of shareholders. The purpose of this study is to evaluate the readability of chairman’s statements of listed companies on the Stock Exchange of Singapore as at 31/12/93. The study also wants to determine what percentage of the population in Singapore can read and understand the reports. Finally, the study attempts to identify several factors, such as level of content disclosure in chairman’s statement, company size and performance, which may affect the readability of chairman’s statements. This study found that majority of chairman’s statements in Singapore are readable only to shareholders with undergraduate qualifications. It was also discovered that approximately 95.6% of the people in Singapore have not achieved the reading comprehension level required to read and understand chairman’s statements. This suggests that there is an urgent need for chairmen to prepare more readable reports so that shareholders can understand them. Correlation analysis and multiple regressions are also run to analyse the data collected. Readability is measured by using two readability formulae, Flesch formula and Fog Index. The independent variables used are content level of chairman’s statement, size of company, liquidity, gearing and profitability. Our correlation analysis shows a significant but weak relationship between Flesch readability score and profitability. Our multiple regression analyses reinforce this relationship when results show that profitability adds additional explanatory power in predicting Flesch score. Results on relationships between readability scores and other remaining variables are found either to be insignificant or inconclusive. This suggests that we need to consider other factors which may be related to readability scores and to examine their relationships in further details. In conclusion to this project, we have recommended some ways of improving on the readability of chairman’s statement and suggested other aspects of the study that could be carried out further to gain a deeper insight into this topic.