Description:
The non-financial information in corporate annual reports is a crucial source for investors’ decision-making. We examine whether and how annual report readability affects opportunistic insider selling in the Chinese market. Our empirical findings show that lower readability of annual reports induces insiders to opportunistically sell more (shares from their existing stakes) and the results also hold after a series of robustness checks. Furthermore, our analysis reveals that stock overvaluation is a possible channels through which the readability of annual reports influence opportunistic insider sales. We also find that media coverage and analyst coverage, as supplementary sources of information, can mitigate the impact of annual report readability. In addition, we show that lower readability of annual reports is more likely to increase opportunistic insider sales among firms that exhibit higher strategic deviance, lower information quality ratings, and non-state-owned enterprises (non-SOEs)