The Effect Of Natural Disasters On The Readability Of Listed Companies’ Annual Reports

As an exogenous event,natural disasters increase the uncertainty of the environment where the company is located,and draw investors’ attention,which will have an impact on the relevant strategic decisions of the management.A few foreign studies have proved the restraining effect of natural disaster events on the economic development,and the impact on the future management decisions of listed companies.However,there are currently few domestic studies on the impact of natural disasters on the company’s micro-level.It is necessary to clarify the impact of natural disasters on the company level.Therefore,this article will explore the strategic decision-making changes of listed companies after major natural disasters.Specifically,this article will take earthquake events to explore the impact of natural disasters on the readability of listed companies’ annual reports to examine whether extreme exogenous shocks will affect corporatelevel strategic decisions.Compared with other natural disaster events,earthquakes are more unpredictable and exogenous,and the location of occurrence is specific,so it is convenient for follow-up exploration.When the company’s performance is bad,managers have a stronger motivation to cover up information in the public disclosure report,thereby affecting investors’ information processing costs and future investment decisions.Annual report readability is a way to measure the quality of information disclosure,while adjusting annual report readability is a means for management to manipulate information.Research based on the readability of annual reports is mostly found in foreign developed capital markets,mainly based on English texts,and cannot be directly applied to the measurement of Chinese texts,so there is still a research gap.Therefore,this article will follow the thinking logic of the predecessors to establish English text readable indicators,and construct an annual report suitable for domestic listed companies through text technical analysis of the Chinese annual reports during the sample period of my country’s Ashare listed companies for further exploration and discussion.Based on a sample of A-share public companies,this article explores the impact of major earthquake events from 2007 to 2019 on the readability of annual reports,and constructs regression samples of companies in the treatment and control group through propensity score matching.Discuss the changes in the strategic decisions of listed companies after the occurrence of exogenous natural disasters.The results of the study show that after the earthquake,listed companies in the affected areas reduced the readability of annual reports.The nature of property rights,corporate governance,political connections and external audit supervision all affect the relationship between the earthquake and the readability of annual reports to a certain extent.Further research found that the occurrence of the earthquake increased the company’s operating risks and led to an increase in financing constraints,which affected the enterprise’s operating.The conclusions of this paper enrich the literature on the readability of Chinese texts,and provide some guidance for investors,management and regulators.