Purpose — The regulatory review process imposes significant costs on companies. Therefore, managers try to find ways to avoid the regulatory review risk. This paper investigates whether corporate reporting readability reduces the regulatory review risk. Design/methodology/approach — This...

Securities commissions regularly review corporate reports, and if the review reveals a possible deficiency— such as a potential accounting error— or requires further clarifications, they send the company a comment letter (CL), including a request for providing written responses and relative...