Abstract

The purpose of this study is to investigate the effect of the readability of annual financial reports on the cost of equity with the moderating role of reporting tone. In this article, the readability of financial reports using four criteria: Flash Diani, document length index, file size, and the number of pages of annual reports and tone Reporting has been evaluated based on a list of vague and negative words. Sample data consisting of 153 companies admitted to the Tehran Stock Exchange were collected in the 10-year period from 1390 to 1399, and the hypotheses were tested using econometric techniques based on combined data and Evios software. . The findings showed that the criteria of file size and number of pages of financial reports play an important role in determining the cost of equity, and with the increase of these text features, the cost of equity also increases. It was also investigated whether the nature of the relationship between the readability of financial reports and the cost of equity depends on the reporting tone and it was found that the negative and vague reporting tone strengthens the positive effect of the file size and the number of pages of financial reports on the cost of equity. The findings of this study support the argument that the readability of financial reports, especially the file size and the number of pages of financial reports, are important in capital pricing by investors in the Iranian capital market.