A plain English measure of financial reporting readability

Samuel B. Bonsall; Andrew J. Leone; Brian P. Miller; Kristina M. Rennekamp

doi:10.1016/j.jacceco.2017.03.002

Journal of Accounting and Economics Vol. 63 No. 2-3 2017

A plain English measure of financial reporting readability

Samuel B. Bonsall^1,2; Andrew J. Leone³; Brian P. Miller⁴; Kristina M. Rennekamp⁵

¹ Pennsylvania State University · ² The Ohio State University · ³ University of Miami · ⁴ Indiana University · ⁵ Cornell University

open access

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).

DOI: 10.1016/j.jacceco.2017.03.002
Volume: 63
Issue: 2-3
Pages: 329-357
Language: en
Sources: bibtex:phds-export.bib openalex crossref

A plain English measure of financial reporting readability

Abstract

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