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

65 Pages Posted: 7 Mar 2016 Last revised: 19 Aug 2017

Travis Dyer

University of North Carolina at Chapel Hill

Mark H. Lang

University of North Carolina at Chapel Hill

Lorien Stice-Lawrence

University of Southern California - Leventhal School of Accounting

Date Written: August 2017

Abstract

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.

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 (August 2017). Journal of Accounting & Economics (JAE), Forthcoming. 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 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 Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

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