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We examine the readability of annual reports, which are essential corporate disclosures that provide primary information to the shareholders. Specifically, we examine how corporate governance affects the ease of reading the annual reports in an emerging economy like India. We use advanced Natural Language Processing (NLP) tools available in Python’s NLTK Library to obtain the Fog index and FKGL scores of 146 BSE-listed firms for the period of 2019–2023. Using the two-step system GMM, we test the link between governance and the readability of 612 firm-year samples. Further, we moderate this association with shareholder participation in the firm. Our fundamental analysis finds an inverse relation between majority of governance characteristics (Board Independence, Board Size, Women Directors, Board Tenure, CEO power, Audit Size, and BIG4) and readability of firm’s annual reports. However, our interaction analysis reveals that shareholder participation moderates the relation between governance and annual report readability. We contribute to the existing literature by using shareholder participation as moderation in this study, showing how shareholder activism in the firm can influence corporate disclosures and help the investor community make well-informed decisions.

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Computational Linguistics for Corporate Governance Research: NLP Application in Analyzing Shareholder Participation and Annual Report Readability

  • 会议论文

  • 发表日期：

    2026年

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  • Arun G. Dsouza,
  • Shridev Devji,
  • Krishna Prasad,
  • K. R. Suprabha

摘要

We examine the readability of annual reports, which are essential corporate disclosures that provide primary information to the shareholders. Specifically, we examine how corporate governance affects the ease of reading the annual reports in an emerging economy like India. We use advanced Natural Language Processing (NLP) tools available in Python’s NLTK Library to obtain the Fog index and FKGL scores of 146 BSE-listed firms for the period of 2019–2023. Using the two-step system GMM, we test the link between governance and the readability of 612 firm-year samples. Further, we moderate this association with shareholder participation in the firm. Our fundamental analysis finds an inverse relation between majority of governance characteristics (Board Independence, Board Size, Women Directors, Board Tenure, CEO power, Audit Size, and BIG4) and readability of firm’s annual reports. However, our interaction analysis reveals that shareholder participation moderates the relation between governance and annual report readability. We contribute to the existing literature by using shareholder participation as moderation in this study, showing how shareholder activism in the firm can influence corporate disclosures and help the investor community make well-informed decisions.