A Plain English Measure of Financial Reporting Readability
Posted: 14 Apr 2017
Date Written: April 5, 2017
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).
Keywords: Plain English Reporting; Textual Analysis; Regulation; Mandatory Disclosure
JEL Classification: M40
Suggested Citation: Suggested Citation