Measuring Readability in Financial Disclosures

• 成果类型: Article
• 署名作者: Loughran, Tim; Mcdonald, Bill
• 署名单位: University of Notre Dame
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12162
• 发表日期: 2014
• 页码: 1643-1671
• 关键词: EARNINGS PERSISTENCE; stock-market; INFORMATION; investors; FORMULA; words

摘要

Defining and measuring readability in the context of financial disclosures becomes important with the increasing use of textual analysis and the Securities and Exchange Commission's plain English initiative. We propose defining readability as the effective communication of valuation-relevant information. The Fog Index-the most commonly applied readability measure-is shown to be poorly specified in financial applications. Of Fog's two components, one is misspecified and the other is difficult to measure. We report that 10-K document file size provides a simple readability proxy that outperforms the Fog Index, does not require document parsing, facilitates replication, and is correlated with alternative readability constructs.