Description:
Annual report is essential for building trust and transparency between a company and its suppliers and customers. And easy-to-understand text in the report can help to develop long-term, mutually beneficial relationships. This study examines how annual report readability impacts the trade credit financing of listed companies in China. The results show that the poor readability of the annual report limits the company’s access to more trade credit financing. And our finding is robust to different measures of readability and trade credit financing. What’s more, the impact of unreadable annual report on trade credit financing is more pronounced when the default risk is higher, that is, for companies with less overseas business and with lower market product power. This study examines how the readability of annual reports affects trade credit financing, providing valuable insights for management seeking to enhance information disclosure quality and expand financing options