Decoding Risk Reports: Readability and Bias in South African Corporate Disclosures

What is it about?

This paper investigates how understandable and unbiased risk information is in the integrated reports of South African listed companies from 2015 to 2019. The study uses automated software to analyze the readability and narrative tone of risk and risk management disclosures. Surprisingly, the findings reveal that these disclosures are both hard to read and exhibit bias towards narrative tones signalling communality and certainty. The study contributes to the existing literature by focusing on the readability and tone of risk disclosures during increased scrutiny, providing valuable insights into the communication of risk information by major South African companies.

Featured Image

Photo by Luke Chesser on Unsplash

Photo by Luke Chesser on Unsplash

Why is it important?

This research holds significance as it delves into the readability and bias within risk and risk management disclosures in the integrated reports of major South African companies. The accessibility and impartiality of risk information are crucial for stakeholders in making well-informed decisions about a company. The findings, indicating a lack of readability and a bias towards specific narrative tones, raise concerns about the effectiveness of corporate communications in this domain. By shedding light on these issues, the research underscores the importance of transparent and unbiased risk reporting. As such disclosures play a vital role in guiding stakeholders, including investors, the study's insights are valuable for both practitioners and regulators aiming to enhance the clarity and objectivity of risk-related information. Ultimately, improving the quality of risk disclosures contributes to the overall transparency and accountability of corporate communication, fostering trust and informed decision-making.