A plain English measure of financial reporting readability

Samuel B. Bonsall, Andrew J. Leone, Brian P. Miller, Kristina Rennekamp

Research output: Contribution to journalArticlepeer-review

66 Scopus citations

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).

Original languageEnglish (US)
Pages (from-to)329-357
Number of pages29
JournalJournal of Accounting and Economics
Volume63
Issue number2-3
DOIs
StatePublished - Apr 1 2017

Keywords

  • Mandatory disclosure
  • Plain English reporting
  • Regulation
  • Textual analysis

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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