Does better firm information disclosure enhance institutional blockholder monitoring on information asymmetry? Evidence from 10-K readability
- Authors
- Choi, Wonseok; Chung, Chune Young
- Issue Date
- Nov-2023
- Publisher
- Elsevier Inc.
- Keywords
- 10-K report readability; Information asymmetry; Institutional monitoring; Plain writing act
- Citation
- International Review of Financial Analysis, v.90
- Journal Title
- International Review of Financial Analysis
- Volume
- 90
- URI
- https://scholarworks.bwise.kr/cau/handle/2019.sw.cau/68334
- DOI
- 10.1016/j.irfa.2023.102899
- ISSN
- 1057-5219
1873-8079
- Abstract
- Using the Plain Writing Act of October 2010 as a source of exogenous variation in 10-K readability, we examine whether improvements in 10-K reports enhance institutional investor monitoring of firms' information environments. This study reveals that the negative association between institutional monitoring and information asymmetry is more robust when firms provide 10-K reports with enhanced readability. Since the implementation of the Act, the impact of improved readability on the relationship between institutional monitoring and information asymmetry has become increasingly pronounced. This finding confirms our hypothesis that improved readability provides better firm information for institutional investor monitoring of firms, thus decreasing information asymmetry. © 2023 Elsevier Inc.
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