Does better firm information disclosure enhance institutional blockholder monitoring on information asymmetry? Evidence from 10-K readability

Wonseok Choi and Chune Young Chung

International Review of Financial Analysis, 2023, vol. 90, issue C

Abstract: Using the Plain Writing Act of October 2010 as a source of exogenous variation in 10-K readability, we examine whether improvements in 10-K reports enhance institutional investor monitoring of firms' information environments. This study reveals that the negative association between institutional monitoring and information asymmetry is more robust when firms provide 10-K reports with enhanced readability. Since the implementation of the Act, the impact of improved readability on the relationship between institutional monitoring and information asymmetry has become increasingly pronounced. This finding confirms our hypothesis that improved readability provides better firm information for institutional investor monitoring of firms, thus decreasing information asymmetry.

Keywords: 10-K report readability; Institutional monitoring; Information asymmetry; Plain writing act (search for similar items in EconPapers)
JEL-codes: G32 G34 M40 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:90:y:2023:i:c:s1057521923004155

DOI: 10.1016/j.irfa.2023.102899

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