68 Pages Posted: 7 Mar 2016 Last revised: 14 Oct 2016
Date Written: October 2016
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: 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
By Ray Ball