Earnings management and Annual report readability: Evidence from Egyptian listed companies

Abstract

The current study examines the effect of earning management on annual report readability. The sample includes 12 firms listed in EGX from 2013 to 2017 from different sectors such as food and beverage sectors, and construction sector. Fog Index is used to measure annual report readability. To measure Earning Management, Modified Jones model is used. In order to test the research hypotheses, three statistical analysis techniques (descriptive analysis, Pearson’s correlation, and regression analysis) are used. It is concluded that there is a positive significant association between earnings management and FOG Index. This indicates a negative association between earning management and annual report readability. This can be explained as when management engages in Earning Management practices, they tend to hide this behavior by increasing the complexity of the annual repor