The Effect of Annual Report Readability on Analyst Following and the Properties of Their Earnings Forecasts

By Reuven Lehavy, Feng Li, Kenneth J. Merkley. 2011

1,074 citations recorded by the source corpus.

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Citations in the corpus

Processing Fluency and Investors’ Reactions to Disclosure Readability (2012, neutral): “Li 2008; You and Zhang 2009; Miller 2010; and Loughran and McDonald 2010). However, my results suggest that it is also important to consider the readability of shorter disclosures as well (like press releases). The results are likely to generalize beyond press releases; SEC filings and verbal (e.g.,”
Corporate Life Cycle and Cost of Equity Capital (2015, neutral): “However, prior studies also suggest that characteristics of growth firms attract greater analyst coverage, attaining potential benefits from private information acquisition (Barth et al., 2001; Lehavy et al., 2011).”
The impact of narrative disclosure readability on bond ratings and the cost of debt (2017, neutral): “Consistent with these concerns, research suggests that firms often fail to write the narrative portion of their investor communications in a clear and concise manner, inhibiting investor understanding (Li 2008; Miller 2010; Lehavy et al. 2011; Lawrence 2013).”
Guiding Through the Fog: Financial Statement Complexity and Voluntary Disclosure (2016, neutral): “In this regard, our paper is related to Lehavy et al. (2011) who examine how analysts respond to the informational problems created by complex financial statements.”
Analyst Information Discovery and Interpretation Roles: A Topic Modeling Approach (2018, neutral): “Prior research also documents that the demand for analyst research increases when investors’ understanding of corporate disclosures requires high processing costs (Lehavy et al. 2011).”
Evidence on the Information Content of Text in Analyst Reports (2014, methodology): “Prior research (Li 2008; Lehavy, Li, and Merkley 2011) shows that longer annual reports are less readable and harder to process.”
Annual report readability and corporate agency costs (2018, background): “Lehavy et al. (2011) and Bozanin and Thevenot (2015) investigate the effect of readability on analysts’ behavior and find that analysts need more time and energy to follow less readable annual reports and provide forecast reports with lower forecast accuracy and higher forecast volatility.”
Readability of Narrative Disclosures in 10-K Reports: Does Managerial Ability Matter? (2018, neutral): “…measures of readability, we adopt the Fog Index (FOG), Flesch–Kincaid (KINCAID), and Flesch (FLESCH), which the prior accounting and finance literature uses extensively (Biddle et al., 2009; Dougal, Engelberg, Garcia, & Parsons, 2012; Lawrence, 2013; Lehavy et al., 2011; Li, 2008; Miller, 2010).”
The readability of integrated reports (2017, neutral): “…view (Adelberg, 1979; Clatworthy & Jones, 2001; Courtis, 1986, 1995, 1998; Courtis & Hassan, 2002; Eugene Baker III & Kare, 1992; Jones, 1988, 1996; Lehavy et al., 2011; Li, 2008; Parker, 1982; Rutherford, 2002; Smith & Taffler, 1992; Stevens et al., 1992; Subramanian et al., 1993; Sydserff &…”
Textual risk disclosures and investors’ risk perceptions (2013, neutral): “Li (2008) finds that the readability of annual reports is associated with earnings persistence, and Lehavy et al. (2011) find that the readability of annual reports affects investors’ decisions.”