The Chairman's Statement in Malaysian Companies: A Test of the Obfuscation Hypothesis

Document Type

Journal Article


Emerald Group Publishing Limited


Faculty of Business and Law


School of Accounting, Finance and Economics




Originally published as: Smith, M., Jamil, A., Chik Johari, Y., & Ahmar Ahmad, S. (2006). The chairman's statement in Malaysian companies: A test of the obfuscation hypothesis. Asian Review of Accounting, 14(1/2), 49-65. Original available here


Purpose – The obfuscation hypothesis suggests that under-performing firms will tend to obscure the meaning of their corporate narratives by deliberately adopting a textual complexity, most readily apparent through poor readability and the use of unnecessarily difficult language. This paper seeks to add to the literature in the area by comparing the textual complexity of corporate narratives, notably the chairman's statement, of main board and second board companies on the Bursa Malaysia (formerly known as the Kuala Lumpur Stock Exchange), with their financial performance, and also to examine the impact of company size, board membership and degree of statutory regulation on the readability of corporate narratives. Design/methodology/approach – Following the existing literature this paper uses readability as a proxy for textual complexity, in addition to more direct measures, and seeks to examine relationships between textual complexity and various measures of financial performance. Findings – The findings suggest that there are significant relationships between corporate language and financial performance, but that these are not consistent with the obfuscation hypothesis. Originality/value – The findings are consistent with the suggestion that increased regulation and statutory monitoring of disclosures are associated with improved readability of narrative. They do not provide support for the obfuscation hypothesis.




Link to publisher version (DOI)