The Effects of Reporting Complexity on Small and Large Investor Trading

47 Pages Posted: 15 Sep 2009 Last revised: 13 May 2014

See all articles by Brian P. Miller

Brian P. Miller

Indiana University - Kelley School of Business - Department of Accounting

Date Written: May 10, 2010

Abstract

This study examines the effects of financial reporting complexity on investors’ trading behavior. I find that more complex (longer and less readable) filings are associated with lower overall trading, and that this relationship appears due to a reduction in small investors’ trading activity. Additional evidence suggests that the association between report complexity and lower abnormal trading is driven by both cross-sectional variation in firms’ disclosure attributes and variations in disclosure complexity over time. Given regulatory concerns over plain English disclosures and the trend toward more disclosure, my investigation into the effects of reporting complexity on small and large investors should be of interest to regulators concerned with reporting clarity and leveling the playing field across classes of investors.

Keywords: Readability, Plain English Disclosure, Trading Volume, Small and Large Investors

JEL Classification: G30, G12, M41, M48

Suggested Citation

Miller, Brian P., The Effects of Reporting Complexity on Small and Large Investor Trading (May 10, 2010). Available at SSRN: https://ssrn.com/abstract=1473863 or http://dx.doi.org/10.2139/ssrn.1473863

Brian P. Miller (Contact Author)

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2606 (Phone)

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