The Evolution of 10-K Textual Disclosure: Evidence from Latent Dirichlet Allocation

68 Pages Posted: 7 Mar 2016 Last revised: 14 Oct 2016

Travis Dyer

University of North Carolina at Chapel Hill

Mark H. Lang

University of North Carolina at Chapel Hill

Lorien Stice-Lawrence

University of North Carolina at Chapel Hill

Date Written: October 2016

Abstract

While characteristics of quantitative accounting data have received substantial attention in the academic literature, much less is known about the accompanying text. We document marked trends in 10-K disclosure over the period 1996-2013, with increases in length, boilerplate, stickiness, and redundancy and decreases in specificity, readability, and the relative amount of hard information. We use Latent Dirichlet Allocation (LDA) to examine specific topics and find that new FASB and SEC requirements explain most of the increase in length and that 3 of the 150 topics — fair value, internal controls, and risk factor disclosures — account for virtually all of the increase. These three disclosures also play a major role in explaining the trends in the remaining textual characteristics. Our results are potentially relevant to regulators in understanding trends in, and topical sources of textual characteristics amid concerns about increasingly onerous accounting disclosures.

Keywords: Disclosure Regulation, Textual Analysis, Latent Dirichlet Allocation, Financial Reporting

JEL Classification: M40, M41, M48

Suggested Citation

Dyer, Travis and Lang, Mark H. and Stice-Lawrence, Lorien, The Evolution of 10-K Textual Disclosure: Evidence from Latent Dirichlet Allocation (October 2016). Available at SSRN: https://ssrn.com/abstract=2741682 or http://dx.doi.org/10.2139/ssrn.2741682

Travis Dyer

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Mark H. Lang (Contact Author)

University of North Carolina at Chapel Hill ( email )

Kenan-Flagler Business School
McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-1644 (Phone)
919-962-4727 (Fax)

Lorien Stice-Lawrence

University of North Carolina at Chapel Hill ( email )

CB 3490, McColl Building
Kenan-Flagler Business School
Chapel Hill, NC 27599
United States

Paper statistics

Downloads
498
Rank
44,982
Abstract Views
1,466