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Communicative Efficiency Ukraine’sBanking System: Evidence From Independent Auditor Reports

Visnyk of the National Bank of Ukraine, 2018, No. 245, pp. 30-44


Communicative Efficiency in Ukraine’s Banking System: Evidence From Independent Auditor Reports

Oleksandr Sukhomlyn ab

a Kyiv School of Economics, Kyiv, Ukraine
b GR Capital, Kyiv, Ukraine


This study, based on the quantitative content analysis, examines communicative efficiency in the Ukrainian banking system, i.e. shows how the tone and the readability of independent auditor reports are associated with a bank performance in the next financial year. The study applies a fixed-effects estimator within the regression to an unbalanced panel dataset of Ukrainian banks. The tone of report variable is constructed with the help of Loughran and McDonald’s Financial Sentiment Word Lists, while readability is estimated using the FOG and Flesch-Kincaid indices. Based on estimations of 2012-2016, the readability of audit reports is found to have no relationship with a bank’s profitability in the next year. However, a more negative tone of auditor report is associated with an increase in bank’s ROA and ROE in the subsequent period. This paper concludes with policy implications and remarks on the practical application and execution of the findings.

JEL Codes: C33, D82, E58, G21, M42

Keywords: quantitative content analysis, communicative value, asymmetric information, tone, readability, independent auditor report

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Citation: Sukhomlyn O. (2018). Communicative Efficiency in Ukraine’s Banking System: Evidence From Independent Auditor Reports. Visnyk of the National Bank of Ukraine, No. 245, pp. 30-44. https://doi.org/10.26531/vnbu2018.245.02

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