A Plain English Measure of Financial Reporting Readability

Posted: 14 Apr 2017

See all articles by Samuel B. Bonsall

Samuel B. Bonsall

Pennsylvania State University - Department of Accounting

Andrew J. Leone

University of Miami

Brian P. Miller

Indiana University - Kelley School of Business - Department of Accounting

Kristina M. Rennekamp

SC Johnson Graduate School of Business; Cornell SC Johnson College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2017

Abstract

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

Bonsall, Samuel B. and Leone, Andrew J. and Miller, Brian P. and Rennekamp, Kristina M., A Plain English Measure of Financial Reporting Readability (April 5, 2017). Journal of Accounting & Economics (JAE), Vol. 63, No. 2-3, 2017; Kelley School of Business Research Paper No. 17-30. Available at SSRN: https://ssrn.com/abstract=2952335

Samuel B. Bonsall (Contact Author)

Pennsylvania State University - Department of Accounting ( email )

University Park, PA 16802-3306
United States

Andrew J. Leone

University of Miami ( email )

School of Business
Coral Gables, FL 33146
United States
305-284-3101 (Phone)

HOME PAGE: http://sbaleone.bus.miami.edu

Brian P. Miller

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

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

Kristina M. Rennekamp

SC Johnson Graduate School of Business ( email )

Ithaca, NY 14853
United States
607-255-0500 (Phone)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

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