A plain English measure of financial reporting readability

Samuel B. Bonsall, Andrew J. Leone, Brian P. Miller and Kristina Rennekamp

Journal of Accounting and Economics, 2017, vol. 63, issue 2, 329-357

Abstract: We propose a new measure of readability, the Bog Index, which captures the plain English attributes of disclosure (e.g., active voice, fewer hidden verbs, etc.). We validate this measure using a series of controlled experiments and an archival-based regulatory intervention to prospectus filing readability. We also demonstrate the importance of understanding the underlying drivers of quantity-based measures of readability. In particular, we caution researchers that a vast amount of the variation in Form 10-K file size over time is driven by the inclusion of content unrelated to the underlying text in the 10-K (e.g., HTML, XML, PDFs).

Keywords: Plain English reporting; Textual analysis; Regulation; Mandatory disclosure (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (104)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:63:y:2017:i:2:p:329-357

DOI: 10.1016/j.jacceco.2017.03.002

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