Lost in the fog: growing complexity in financial reporting—a comparative study

This study investigates the evolving readability of financial reporting by analyzing Item 7 of the 10-K reports over a 26-year period, utilizing a dataset of nearly 200,000 reports retrieved from SEC EDGAR filings. Our analysis reveals a significant decline in the readability of these reports over time, measured using the Fog Index. Specifically, we find that the number of years of schooling required to comprehend these texts increases by nearly one month each year, indicating a growing inaccessibility of financial reports for a substantial portion of the population. To contextualize these findings, we extend our analysis to include data from diverse financial corpora, encompassing almost 10 million documents. While most financial texts have shown a systematic increase in readability over the past decades, the Wall Street Journal emerges as a notable exception, exhibiting a moderate decline in readability-though at a much slower rate compared to Item 7. This study highlights the widening gap in financial text accessibility and underscores the need for more readable financial reporting.

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Publication Details

Journal
Humanities and Social Sciences Communications
Published
2025-11-21
DOI
https://doi.org/10.1057/s41599-025-06094-y
Citations
1
Primary Topic
Auditing, Earnings Management, Governance
Type
article
Field-Weighted Citation Impact
3.91
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article

Lost in the fog: growing complexity in financial reporting—a comparative study

Yevgeny Mugerman, Danny Lesmy, Lev Muchnik
1 citations
Humanities and Social Sciences Communications
Auditing, Earnings Management, Governance
3.91
article

Lost in the fog: growing complexity in financial reporting—a comparative study

Yevgeny Mugerman, Danny Lesmy, Lev Muchnik
article en
1 citations

Abstract

This study investigates the evolving readability of financial reporting by analyzing Item 7 of the 10-K reports over a 26-year period, utilizing a dataset of nearly 200,000 reports retrieved from SEC EDGAR filings. Our analysis reveals a significant decline in the readability of these reports over time, measured using the Fog Index. Specifically, we find that the number of years of schooling required to comprehend these texts increases by nearly one month each year, indicating a growing inaccessibility of financial reports for a substantial portion of the population. To contextualize these findings, we extend our analysis to include data from diverse financial corpora, encompassing almost 10 million documents. While most financial texts have shown a systematic increase in readability over the past decades, the Wall Street Journal emerges as a notable exception, exhibiting a moderate decline in readability-though at a much slower rate compared to Item 7. This study highlights the widening gap in financial text accessibility and underscores the need for more readable financial reporting.

Humanities and Social Sciences CommunicationsVol. 12(1)
Bar-Ilan University (IL), Hebrew University of Jerusalem (IL)
Openalex Percentile: Top 5%
Auditing, Earnings Management, Governance
3.91
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