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The purpose of this research is to examine the influence of ownership structure, independent directors, managerial agency costs and audit's opinion on the firm's financially distressed status using a sample of distressed companies and a matched‐pair sample of non‐distressed companies listed on Chinese stock markets.

The study utilizes publicly‐available data from annual reports of a sample of 404 non‐finance distressed firms listed on Chinese stock markets and a sample of matched 404 non‐distressed firms for a period covering the 1998‐2005 financial years with binary logistic analysis.

Ownership concentration, state ownership, ultimate owner, independent directors and auditors' opinion turn out to be negatively associated with the probability of financial distress, while administrative expense ratio is positively related with the likelihood of financial distress. Managerial ownership does not appear to be a significant determinant.

The paper offers evidence on the extent to which distress is associated with corporate governance from the emerging stock markets. It would be educational to Chinese small investors who excessively favour pursuing short‐term returns and be helpful for regulatory authorities in making policies on corporate governance reformation.

This paper investigates the impact of annual reports complexity (associated with tone complexity) on dividend policy and value of dividend policy.

This paper uses the variable complexity provided by the textual analytics software (Diction 7.0) as the proxy for annual reports' tone complexity. The data covered non-financial American firms from years 2011–2019. The pooled ordinary least squares (OLS) regression and the instrumental variable regression are used to test the study’s arguments.

The findings suggest that the signaling theory of dividends holds in the United States. Firms with more complex annual reports tend to distribute more dividends, mainly in environment of high information. When information asymmetry is high, managers would use dividends as a tool to mitigate information asymmetry. Furthermore, the findings suggest that dividend policy has a stronger impact on firm value, especially when the tones of annual reports are highly complex. These findings support the previous results, namely, that managers would opt for dividend policy as a signaling tool for its positive impact on firm value. The results are robust to potential endogeneity issues and alternative proxies for both dividend policy and information asymmetry.

The results demonstrate that the dividends' signaling theory holds in the United States, where the findings cannot be generalized to all markets; However, the findings of this research can be of use to potential and current investors, users of annual reports and decision makers as well.

The paper highlights the effect of the tone complexity of annual reports (using 10K text analytics) on the value of dividend policy and dividend policy itself in a developed economy. Understanding this relation will enable stakeholders to forecast future dividends, choose more appropriate valuation methods and hence restore investors' faith.