Double Dutch Finally Fixed? A Large-Scale Investigation into the Readability of Mandatory Financial Product Information

Journal of Consumer Policy https://doi.org/10.1007/s10603-021-09486-0

28 Pages Posted: 28 Mar 2022

See all articles by Dominik Scheld

Dominik Scheld

University of Marburg | Behavioral Finance Research Group

Oscar Anselm Stolper

University of Marburg | Behavioral Finance Research Group

Andreas Walter

University of Giessen - Department of Financial Services

Date Written: March 4, 2022

Abstract

With the introduction of short-form disclosure documents, financial regulation in the EU emphasizes the use of plain language to facilitate comprehensibility. We evaluate whether these documents and the accompanying plain language guidelines improve the readability of mandatory product information addressed to mutual fund investors. Applying advanced text mining algorithms, we benchmark the readability of product information by means of objective and readily replicable methods. While mutual fund information on average does not come in plain language, we find that readability improved significantly following the introduction of Key Investor Information Documents (KIIDs). Improvements are driven by simpler syntax and writing style. By contrast, the authors find that the use of jargon remains pervasive and report non-compliance with mandatory design requirements. We discuss our results and propose potential disclosure improvements.

Keywords: Mandatory information disclosure, Investor protection, Readability, Regulation, Retail finance, Information model

JEL Classification: D08, D18 G11, G28

Suggested Citation

Scheld, Dominik and Stolper, Oscar Anselm and Walter, Andreas, Double Dutch Finally Fixed? A Large-Scale Investigation into the Readability of Mandatory Financial Product Information (March 4, 2022). Journal of Consumer Policy https://doi.org/10.1007/s10603-021-09486-0, Available at SSRN: https://ssrn.com/abstract=4049798

Dominik Scheld (Contact Author)

University of Marburg | Behavioral Finance Research Group ( email )

Am Plan 1
Marburg, 35032
Germany

Oscar Anselm Stolper

University of Marburg | Behavioral Finance Research Group ( email )

Am Plan 1
Marburg, 35032
Germany

HOME PAGE: http://https://www.uni-marburg.de/de/fb02/professuren/bwl/behavioralfinance

Andreas Walter

University of Giessen - Department of Financial Services ( email )

Betriebswirtschaftslehre V
Giessen, 35394
Germany

HOME PAGE: http://https://www.uni-giessen.de/fbz/fb02/fb/professuren/bwl/walter

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