Purpose: The purpose of this study is to investigate the moderating role of knowledge management (KM) strategies in developing the effect of intellectual capital (IC) on innovation for small- and medium-sized enterprises (SMEs). Specifically, the current study explores how different interactions between IC and KM strategies lead to more powerful innovation in SMEs.Design/methodology/approach: This study analyzes survey responses from 170 owners/managers of SMEs in Iran. The study uses partial least square structural equation modeling methods within Smart PLS software.Findings: This study reveals that first IC has an excellent level of engagement with both incremental and radical types of innovation, but its engagement level with radical innovation is higher than that for incremental innovation. Second, the human capital component of IC has a direct positive impact on radical innovation although it has no significant impact on incremental innovation. Third, the personalization strategy of KM positively moderates the impact of human capital on both incremental and radical innovation.Originality/value: This paper is an empirical attempt in SMEs to combine IC and KM strategies to strengthen innovation. It presents research community for SMEs of a developing country that has been investigated in a limited way compared to large firms of developed nations and provides valuable insights into further research.

Purpose: Informational efficiency is a fundamental aspect of capital market quality, and therefore, regulators, managers and practitioners attempt to find ways to improve the informational efficiency. Since prior studies primarily focus on the numerical attributes of corporate reporting, it is not yet adequately known whether or not the linguistic attributes of corporate reporting affect informational efficiency. Thus, the purpose of this paper is to examine whether corporate reporting readability (readability), as an important linguistic attribute of corporate reporting, affects informational efficiency. Design/methodology/approach: To measure readability, this paper uses Fog index. Moreover, to measure informational efficiency, the paper uses stock return variance ratios. Findings: The findings reveal a positive and significant association between readability and informational efficiency. Moreover, the findings show that the association of readability and informational efficiency is stronger for firms facing higher information asymmetry. The findings further document the spillover effect of readability, in the sense that the readability of economically related public firms affects a firm’s informational efficiency. Overall, the results support the arguments that readability enhances informational efficiency. Originality/value: This study contributes to the literature by providing evidence on the internalities and externalities of readability in the context of informational efficiency. Thus, the study will be of interest to regulators, managers and practitioners, especially in emerging capital markets, who tend to find practical and easy ways to improve informational efficiency.

The present research investigates the relationship between managers’ disclosure tone and the trading volume of small and large investors separately. The inconsistency of disclosure tone and abnormal trading volume generally indicates information asymmetry between managers and investors. However, by separating the abnormal trading volume of minor investors from major investors, this relationship shows the information asymmetry between minor and major investors. In this research, the disclosure tone of management discussion and analysis (MD&A) is measured using Loughran and McDonald’s (L&M) finance-oriented dictionaries, and tone inconsistency is measured using a benchmark model. The data were collected from 143 companies listed on the Tehran Stock Exchange from 2011 to 2020, totalling 1380 annual reports. The results show that MD&A tone inconsistency positively correlates with abnormal trading volume for all investors. In addition, MD&A tone inconsistency has a different impact on the trading behaviour of small and large investors and misleads the former. The present research contributes to the literature by providing evidence of the relationship between MD&A tone inconsistency and abnormal trading volume of small and major investors. It also uses both common words and word combinations to measure tone.

An implicit premise of regulators and much empirical research is that financial reporting readability (readability) substantially reflects management choices. To investigate this issue, we decompose readability into its discretionary and innate components. To validate this decomposition, we examine whether these two components have different uncertainty effects. Our empirical findings show that readability is primarily the result of firm fundamentals rather than managerial choices. Furthermore, consistent with expectation, discretionary readability has a weaker uncertainty effect than innate readability. The findings are robust to a variety of additional tests. This study contributes to regulators to better assess readability and to empirical literature to construct more accurate tests.

Purpose: Chief executive officer (CEO) ability may have an effect on various corporate reporting decisions, and consequently, the CEO ability is subject to scrutiny by regulatory reviewers. However, theoretical literature provides mixed evidence on how the CEO ability affects the regulatory review risk. Thus, this study aims to empirically examine the effect of CEO ability on regulatory review risk. Design/methodology/approach: To measure CEO ability, this study uses the CEO ability-score developed by Demerjian et al. (2012). Further, to measure regulatory review risk, the study uses the probability of receiving a comment letter from the Securities and Exchange Organization of Iran. Findings: This study finds that the relationship between CEO ability and regulatory review risk is generally negative and statistically significant but not economically significant, i.e. the relationship is very small. In this regard, the study shows that the relationship is negative and also statistically and economically significant for firms with low levels of agency conflicts and high levels of corporate governance quality; and is positive and also statistically and economically significant for firms with high levels of agency conflicts and low levels of corporate governance quality. In addition, while the study finds no evidence that the regulatory reviewers’ workload compression influences the general relationship between CEO ability and regulatory review risk, it documents that low (high) regulatory reviewers’ workload compression weakens (strengthens) both the relationships stated above. Originality/value: Collectively, the results suggest that the agency conflicts/corporate governance quality and regulatory reviewers’ workload compression are important factors in the analysis of the relationship between the CEO ability and regulatory review risk. The results offer insights into the opposing theoretical viewpoints about the relationship between CEO ability and regulatory review risk. Thus, the results will be of interest to boards of directors and other stakeholders involved in the regulatory review process.

Purpose: The regulatory review process imposes significant costs on companies. Therefore, managers try to find ways to avoid the regulatory review risk. The purpose of this paper is to investigate whether corporate reporting readability reduces the regulatory review risk.Design/methodology/approach: This study measures the corporate reporting readability using the Fog Index. It measures the regulatory review risk using the probability of receiving a comment letter from the Securities and Exchange Organization of Iran.Findings: The findings reveal that corporate reporting readability reduces the regulatory review risk, after controlling for the factors that affect the regulatory review risk.Originality/value: The current paper identifies an easy strategy for managers to mitigate one of the important risks faced by companies. Thus, the results will be of interest to managers, audit committees, and stakeholders involved in the regulatory review process.