Narrative reporting, both financial and non-financial, is an increasingly popular method of information asymmetry reduction and it undoubtedly enriches the spectrum of investor attainable information. The aim of this Master’s thesis was to answer whether there is bias in narrative reporting and whether companies with a higher business failure probability have a harder to read annual report. In total, 34 annual reports were analyzed, 17 “successful” paired with 17 “unsuccessful” taken from Zagreb Stock Exchange companies. FOG index was used to calculate readability based on 3 content themed sections of MD&A: the results of operations, relevant business risks and future operations projection. Altman Z score was used to calculate business failure probability. Test results confirm statistical significance of correlation coefficient between MD&A readability and business failure probability. Regarding the strength and direction of correlation, with Spearman’s r equal to -0.631, it is concluded that said variables have large negative linear correlation. This means that companies with an increased business failure probability have lower levels of financial statement readability. Research findings are on par with theoretical expectations and show bias in companies’ disclosure of both positive and negative results of operations. Research also proves that content and text analysis of financial statements narrative elements could be useful, especially when a company’s financial health is not seemingly compromised but readability is irrationally low.