Business strategy and financial reporting readability

Business strategy exerts a considerable impact on complexities, risk and corporate environmental uncertainties as well as the way of providing financial reporting. On this line of argument, therefore, the present study seeks to scrutinize the effect of business strategy on corporate financial reporting readability. In doing so, Fog and Fletch indices are employed to measure financial reporting readability, and the composite scoring system developed by Ittner et al (1997) is also used to determine the corporate business strategy type. The research hypotheses are built on a sample of 84 firms listed on the Tehran Stock Exchange during the years 2013-2017 and then tested using multivariate regression model based on panel data. The findings reveal that firms with aggressive strategies provide less readable financial reporting in comparison with their defensive counterparts. Additionally, the results of analyzing sensitive testing suggest that use of alternative proxies for measurement of financial reporting readability and business strategy does not affect the main results of the study, thereby confirming the robustness of the results.