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Investors reward readable disclosures, study finds

Tammy Whitehouse | June 14, 2017

It turns out investors really do value and reward plain-English disclosures.

An academic study soon to be published in the American Accounting Association’s professional journal says companies that provide less readable disclosures leave investors less comfortable in their assessment or evaluation of the company as a prospective investment.

What’s more, investors left somehow unsatisfied by less readable disclosures are more sensitive to outside sources of information about the company. And even if they don’t seek out that additional outside information, such investors tend to provide lower overall value to those companies.

The authors of the study say their findings poke holes in a prevailing notion in financial management that says the way to hide poor financial results is in poorly written disclosures. The study finds complicated,...

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