Measuring the Readability of Financial Reports and Management Obfuscation Hypothesis1

A significant amount of accounting information is provided to users in the form of explanatory and written disclosures. Financial reporting are an integral part of an organization's financial reporting. These disclosures help users of financial information to get management's picture of the company. The literature has pointed out that managers, as the authors of company reporting, have the greatest impact on the writing (qualitative) part of reporting and their readability. By using a new model to measure the complexity of the readability of financial reporting and through the analysis of data related to Management Discussion and Analysis Report and financial statements of 78 companies present in the Tehran Stock Exchange, using correlation and regression analysis methods, to investigate the functional characteristics and the structure of the company deals with the readability of published reporting. The results show a positive and significant relationship between the amount of return on assets and the readability of financial reporting. The results show a positive and significant relationship between the amount of return on assets and the readability of financial reporting. On the other hand, the positive and significant effect of operating cash flows on the readability of financial reporting is supported only at the 90% confidence level. Also, there is a negative and significant correlation between company age and financial leverage with the readability of financial reporting, but there is no significant correlation between company size and the readability of financial reporting.