What derives less readable 10-K reports: Investor vs Firm-complexity

Abstract

In this study, I suggest a new channel to explain the negative association between the readability of 10-K reports and firm’s stock price volatility. I find that a high level of firm-complexity influences a decrease in readability of 10-K reports as a firm’s future uncertainty increases. Firms with higher complexity, such as growth firms, release more hard-to-read 10-K reports. The new suggested channel, firm-complexity channel, better explains poor readability of 10-K reports.