Text Readability and Bank Risk-Taking : Evidence from GCC

We investigate the relationship between annual reports’ text readability and bank risk-taking in the Gulf Cooperation Council countries. By using the Flesh-Reading-Ease score and the Flesh–Kincaid Grade score, we find that easy-to-read annual reports are associated with a higher probability that banks will suffer from financial distress. This finding suggests that banks with higher risks have a greater incentive to reduce information asymmetry, resulting in easy-to-read annual reports to gain the trust of the banks’ investors. This result may be also attributable to the fact that GCC banks have a tight culture and formalize procedures that banks’ managers rely upon to manage discomfort circumstances like risk-taking behavior