The Fast and the Circuitous : Semantic Progression as a Type of Disclosure Complexity

This paper examines linguistic complexity in financial reporting using three measures of semantic progression. Namely, speed reflects how fast the narrative moves, volume reflects how much ground it covers, and circuitousness reflects how much it goes in circles. We find that speed and volume (circuitousness) in the 10-K are positively (negatively) associated with reporting timeliness and accuracy, earnings quality, analyst forecast accuracy, and price discovery. Thus, speed and volume seem beneficial and circuitousness seems detrimental, at least in the context of financial reporting. Moreover, the explanatory power of the progression complexity variables is incremental to a host of traditional factors, including alternative measures of complexity such as the fog index and document length