M51 - Personnel Economics: Firm Employment Decisions; PromotionsReturn

This research examines the relation between annual report readability and company performance in a German-speaking country, Austria. The incomplete revelation hypothesis, management obfuscation hypothesis and agency theory assume that firms with lower performance strategically use readability in their disclosures to obfuscate negative results. For investors, reading, analysing, and interpreting data becomes a costly affair; this weakens the negative effect of such data on a firm’s reputation and share price. We use LIX and Flesch formulas to measure the readability of letters to the shareholders and/or interviews with the board in annual reports. The sample consists of 37 companies that are listed on the Prime Market of the Vienna Stock Exchange and their data from the year 2009 to 2020. Company performance is measured by the change in turnover, profit, and share price. The analysed sections mostly show high to very high levels of difficulty. During the observation period, readability levels do not change significantly. We find that the annual reports of firms with lower performance are not harder to read and, therefore, cannot confirm the management obfuscation hypothesis. A significant influence of change in profit/loss on readability is minutely observed. Possible reasons for this observation could be characteristics of the German language, statistical outliers, the long observation period, more professional investor relations offices, and changing communication channels between companies and stakeholders. The last point, changing communication channels, also puts the obfuscation hypothesis and its application to readability up for discussion again.
Implications for Central European audience: Our study shows that also Central European countries are confronted with low levels of readability in annual reports. Nevertheless, we cannot see a clear tendency towards obfuscation in corporate disclosures.

This paper analyses, reviews and connects the existing literature about workplace health management systems. We investigate the empirical evidence if a mandatory implementation could lead to a Pareto improvement for all stakeholders. This evaluation is based on the inclusion of several studies, which are not yet connected to the health-related issue. The increasing incidence of employee health issues generates high costs for employers as well as for insurers. Workplace Health Management Systems act as preventive measures in reducing health-related costs. Many case studies are used to explain the concepts and the specific cost reduction for the companies analyzed. But there is still a lack of a broad empirical base to provide convincing evidence for the cost-effectiveness of these programs. To demonstrate the general efficiency of these systems, several studies of different concepts with similar characteristics are compared to ensure, that the mandatory implementation leads to positive effects on the economy. We find that by implementing just a few prevention measures, positive returns can be achieved for a majority of sectors. Given that the market seems incapable of creating this allocation improvement by itself, the integration of health management into the Working Conditions Act seems reasonable, since this could allow a Pareto-efficient outcome to be achieved. Consequently, implementation will not lead to a reduction in the competitiveness of European employers, but rather to increased staff retention and improved productivity due to fewer employee sick days and an improvement in public health and makes the mandatory implementation of workplace health management systems a considerable issue for policymakers.