A growing literature investigates the association between stock return variation and several aspects of information and governance structures, in both a cross-country setting and a cross-firm setting within the U.S. Papers use either idiosyncratic stock return volatility or R2 as interchangeable measures of firm-specific return variation but report inconsistent results. An important reason for the differing interpretations is the assumption about whether lower R2 (or higher ) captures firm-specific news or noise. We document that higher (or equivalently, lower R2) resembles noise. In addition, we show, analytically and empirically, that different results obtain when using R2 or because the systematic risk inherent in the R2 metric is also correlated with the independent variable of interest. Therefore, we recommend that when assessing the association between R2 (or ) and some independent variable, researchers (1) control for elements of systematic risk and (2) triangulate their findings with other measures of information environment. Data Availability: The data in this study are available from commercial providers, e.g., WRDS, Compustat, CRSP, I/B/E/S.

We examine the readability of text and the use of numbers in the annual filings and earnings press releases of foreign firms listed on U.S. stock exchanges. We find that foreign firms generally write clearer text and present relatively more numerical data than their U.S. firm counterparts. More importantly, we find that the readability of the text and use of numbers increases as the foreign firms get geographically further from the U.S. It also increases as the foreign firm's home country has greater differences in accounting standards or investor protection laws relative to the U.S. Further corroborating our results, we also find that these communication efforts are partially successful. Within a country, firms that produce relatively more readable disclosures attract relatively more U.S. institutional ownership. Collectively, our results suggest that foreign firms are responding to a perceived reluctance on the part of U.S. investors to own them and attempt to lower the investors' information disadvantage or psychological distance by providing clearer and more concrete disclosures.