Annual Report Text Information and Credit Rating Based on the Perspective of Readability

The current credit rating system gives much attention to the quantitative situation of the company's finances, whereas the soft information hidden in the company's annual reports is often ignored. This study reviews the annual reports of A-share listed companies in China from 2007 to 2021 and explores the relationship between the readability of the annual reports and the credit ratings given by rating agencies. We find that the readability of annual reports significantly impacts the company's credit rating. Further heterogeneity testing reveals that this impact significantly varies across different types of companies. Therefore, credit rating agencies should pay due attention to the soft information in the annual report when rating a company to ensure accuracy in their ratings.

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Publication Details

Journal
IEEE Open Journal of the Computer Society
Published
2024-12-31
DOI
https://doi.org/10.1109/ojcs.2024.3523699
Primary Topic
Research studies in Vietnam
Type
article
Field-Weighted Citation Impact
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article

Annual Report Text Information and Credit Rating Based on the Perspective of Readability

Minjia Shi, Gong Yu, Dongli Han
IEEE Open Journal of the Computer Society
Research studies in Vietnam
article

Annual Report Text Information and Credit Rating Based on the Perspective of Readability

Minjia Shi, Gong Yu, Dongli Han
article en

Abstract

The current credit rating system gives much attention to the quantitative situation of the company's finances, whereas the soft information hidden in the company's annual reports is often ignored. This study reviews the annual reports of A-share listed companies in China from 2007 to 2021 and explores the relationship between the readability of the annual reports and the credit ratings given by rating agencies. We find that the readability of annual reports significantly impacts the company's credit rating. Further heterogeneity testing reveals that this impact significantly varies across different types of companies. Therefore, credit rating agencies should pay due attention to the soft information in the annual report when rating a company to ensure accuracy in their ratings.

IEEE Open Journal of the Computer SocietyVol. 6
Central University of Finance and Economics (CN)
Decent work and economic growth
Openalex Percentile: Top 76%
Research studies in Vietnam
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