Annual report readability and stock return synchronicity: Evidence from India

Figures & data

Figure 1. Relationship between ARR and Synchronicity.

Figure 2. Conceptual framework.

Table 1. Summary statistics

	Mean	Std. Dev.	min	Median	max	N
$R^2$	0.309	0.262	6.43e-06	0.239	0.943	1800
Synchronicity	−0.599	0.811	−2.414	−0.504	0.631	1800
Fog	34.676	7.162	25.330	33.000	53.040	1572
ROA	7.739	9.305	−93.111	6.525	76.772	1775
Leverage	0.52	0.256	0.002	0.496	2.691	1789
MTB	2.879	3.013	0.287	1.893	42.566	1788
LME	5.006	0.589	3.475	4.934	6.933	1793
Volume	7.464	1.117	3.067	7.473	11.551	1786

Source: Prepared by authors

Table 2. Pairwise correlations

Variables	(1)	(2)		(3)	(4)	(5)	(6)	(7)
(1) Synchronicity	1.000
(2) Fog	0.013	1.000
	(0.652)
(3) ROA	−0.078	−0.064		1.000
	(0.003)	(0.022)
(4) Leverage	0.087	0.116		−0.535	1.000
	(0.001)	(0.000)		(0.000)
(5) MTB	−0.071	−0.072		0.320	−0.300	1.000
	(0.007)	(0.010)		(0.000)	(0.000)
(6) LME	−0.043	0.009		0.097	0.065	0.131	1.000
	(0.102)	(0.742)		(0.000)	(0.014)	(0.000)
(7) Volume	−0.045	0.018		−0.114	0.210	−0.174	0.107	1.000
	(0.088)	(0.530)		(0.000)	(0.000)	(0.000)	(0.000)

Source: Prepared by authors

Note: P values in parentheses

Table 3. ARR and Synchronicity

	(1)	(2)	(3)	(4)
VARIABLES	Synchronicity	Synchronicity	Synchronicity	Synchronicity
L. Fog	−0.010***	−0.008**
	(0.004)	(0.004)
L. Flesch Kincaid			−0.00004***	−0.00003***
			(0.000)	(0.000)
L. ROA		0.008**		0.003
		(0.004)		(0.004)
L. Leverage		−0.318		−0.521
		(0.298)		(0.319)
L. MTB		−0.024		0.031
		(0.024)		(0.026)
L. LME		−1.516***		−1.771***
		(0.205)		(0.228)
L. Volume		0.018		0.023
		(0.067)		(0.065)
Constant	0.232*	7.560***	−0.108*	8.855***
	(0.126)	(0.848)	(0.061)	(1.975)
Observations	1,282	1,259	1,113	1,090
Number of CO_ID	360	358	329	327
R-squared	0.272	0.330	0.259	0.320
Year FE	Yes	Yes	Yes	Yes

Source: Prepared by authors

Note: Robust standard errors in parentheses ***p<0.01, **p<0.05, *p<0.1

Table 4. Conditioning effects of institutional investments

	Institutional investment
	High	Low
	(1)	(2)
VARIABLES	Synchronicity	Synchronicity
L. Fog	−0.013***	−0.008
	(0.005)	(0.007)
L. ROA	0.007	0.011*
	(0.005)	(0.006)
L. Leverage	−0.818	−0.460
	(0.747)	(0.445)
L. MTB	−0.038	−0.043
	(0.053)	(0.037)
L. LME	−1.409***	−1.634***
	(0.351)	(0.199)
L. Volume	0.018	−0.068
	(0.062)	(0.083)
Constant	8.171***	7.660***
	(1.605)	(0.999)
Observations	560	589
Number of CO_ID	163	165
R-squared	0.356	0.359
Year FE	Yes	Yes

Source: Prepared by authors

Note: Robust standard errors in parentheses ***p<0.01, **p<0.05, *p<0.1

Table 5. Conditioning effects of information asymmetry

	Information asymmetry
	High	Low
	(1)	(2)
VARIABLES	Synchronicity	Synchronicity
L. Fog	0.002	−0.018**
	(0.005)	(0.007)
L. ROA	0.011	0.010**
	(0.009)	(0.004)
L. Leverage	−0.223	−0.289
	(0.750)	(0.323)
L. MTB	−0.016	−0.105*
	(0.032)	(0.057)
L. LME	−2.141***	−1.101***
	(0.310)	(0.317)
L. Volume	0.133	0.042
	(0.075)	(0.083)
Constant	9.136***	6.598***
	(1.626)	(1.631)
Observations	547	529
Number of CO_ID	153	154
R-squared	0.399	0.267
Year FE	Yes	Yes

Source: Prepared by authors

Note: Robust standard errors in parentheses ***p<0.01, **p<0.05, *p<0.1

Table 6. Conditioning effects of analyst following

Analyst following
	High	Low
	(1)	(2)
VARIABLES	Synchronicity	Synchronicity
L. Fog	−0.010*	−0.009
	(0.005)	(0.007)
L. ROA	0.004	0.002
	(0.010)	(0.005)
L. Leverage	−0.454	−0.517
	(0.714)	(0.575)
L. MTB	−0.078*	0.008
	(0.040)	(0.021)
L. LME	−1.336***	−1.672***
	(0.256)	(0.322)
L. Volume	−0.030	0.085
	(0.077)	(0.060)
Constant	7.923***	7.183***
	(1.246)	(1.463)
Observations	695	584
Number of CO_ID	198	166
R-squared	0.368	0.320
Year FE	Yes	Yes

Source: Prepared by authors

Note: Robust standard errors in parentheses ***p<0.01, **p<0.05, *p<0.1

Table 7. Two-stage regression analysis

	1^st Stage Regression		2^nd Stage Regression
	(1)	(2)	(3)	(4)
VARIABLES	Fog	Flesch Kincaid	Synchronicity	Synchronicity
Residual Fog			−0.011**
			(0.005)
Residual Flesch				−0.004**
				(0.002)
Age	0.234	0.538
	(0.181)	(0.736)
Business Segments	-	-
Size	1.590**	1.937*
	(0.639)	(1.113)
Auditor Quality	-	-
MTB	1.018***	1.628***
	(0.128)	(0.241)
Volatility of earnings	0.000	0.000
	(0.000)	(0.000)
Volatility of returns	0.234	1.060
	(0.292)	(1.092)
Tobin’s Q	−1.398***	−2.180***
	(0.114)	(0.214)
L. ROA			0.017**	0.014*
			(0.007)	(0.007)
L. Leverage			−0.055	−0.214
			(0.405)	(0.481)
L. MTB			−0.058	−0.015
			(0.040)	(0.033)
L. LME			−2.059***	−2.207***
			(0.349)	(0.366)
L. Volume			0.018	−0.033
			(0.090)	(0.084)
Constant	8.376	30.968	9.968***	11.000***
	(10.704)	(35.312)	(1.414)	(1.473)
Observations	1,045	944	841	756
Number of CO_ID	242	224	240	223
R-squared	0.097	0.449	0.317	0.306
Year FE	Yes	Yes	Yes	Yes

Source: Prepared by authors

Note: Robust standard errors in parentheses ***p<0.01, **p<0.05, *p<0.1

Table A1. Information asymmetry, institutional investment, analyst coverage and stock return Synchronicity

	(1)
VARIABLES	Synchronicity
L. Fog	−0.007*
	(0.004)
L. Asymmetry	−0.001
	(0.005)
L. Institutional investment	0.005**
	(0.002)
L. Analyst following	0.462**
	(0.209)
L. ROA	0.010*
	(0.005)
L. Leverage	−0.357
	(0.518)
L. MTB	−0.037
	(0.038)
L. LME	−1.981***
	(0.303)
L. Volume	0.029
	(0.073)
Constant	9.162***
	(1.134)
Observations	1,189
R-squared	0.320
Number of CO_ID	345
Year FE	Yes

Source: Prepared by authors

Note: Robust standard errors in parentheses ***p<0.01, **p<0.05, *p<0.1