Information flow and market efficiency: The economic impact of precise language

Andreas Barth, Sasan Mansouri and Carl Fabian Wöbbeking

No 13/2025, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper examines the impact of complex yet precise language, particularly financial jargon, on information dissemination and ultimately market efficiency. As a natural laboratory, we analyze the information exchanged during earnings conference calls, where we instrument jargon with the Plain Writing Act of 2010. Our findings suggest that the Act's promotion of plain language usage results in a reduction in complex financial jargon for US firms. However, in contrast to the presumed benefits of accessible language, this reduction in jargon is associated with a decrease in market efficiency, implying that the Act may inadvertently hinder information flow. This finding is particularly important at the juncture where human-generated information is received by machines, which are known to be vunerable to ambiguous inputs.

Keywords: earnings conference calls; information asymmetry; jargon; market efficiency; Plain Writing Act; precise language (search for similar items in EconPapers)
JEL-codes: G00 G14 M40 M41 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/324642/1/1933636904.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:324642

DOI: 10.18717/dpds-2j29

Access Statistics for this paper

More papers in IWH Discussion Papers from Halle Institute for Economic Research (IWH) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().