Readability in Sustainability and Annual Reports: Does It Affect Asymmetry Information and Firm Value?

This study examines the effects of sustainability and annual report readability on information asymmetry and firm value in high-profile industries. Using multiple regression analysis on 217 high-profile firms listed on the Indonesian Stock Exchange from 2017 to 2020, we assessed the relationships using FRE to measure readability scores and weighted least squares regression. Our findings indicate that both sustainability and annual report readability positively influence information asymmetry while negatively affecting firm value. We further validated these findings with non-linear and robustness tests, revealing non-linear relationships between the variables. This study bridges a gap in the relatively new field of readability of sustainability and CSR reporting in Asia, particularly in Indonesia. The results are useful for companies looking to adopt sustainability in their business models and improve report readability, thus aiding investors in accurately understanding company conditions. The study is context-specific to Indonesia, with limitations including the measurement of readability using FRE only on certain report sections. Future research could explore other readability indicators, variables affecting firm value, and a broader dataset.