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A plain English measure of financial reporting readability

Author

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

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).

Suggested Citation

  • Bonsall, Samuel B. & Leone, Andrew J. & Miller, Brian P. & Rennekamp, Kristina, 2017. "A plain English measure of financial reporting readability," Journal of Accounting and Economics, Elsevier, vol. 63(2), pages 329-357.
    • Handle: RePEc:eee:jaecon:v:63:y:2017:i:2:p:329-357
    DOI: 10.1016/j.jacceco.2017.03.002
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    References listed on IDEAS

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