Does Concrete Language in Disclosures Increase Willingness to Invest?

Does Concrete Language in Disclosures Increase Willingness to Invest?ขวด-220-r/ As part of its push for more plain English in disclosures, the SEC argues that firms should use more concrete language to make abstract concepts clearer to investors. We use two experiments to show that, when concrete language is highlighted in a prospectus, investors are significantly more willing to invest in a firm than when abstract language is highlighted. Furthermore, we show the effect of concrete language is particularly important when investors feel more psychologically distant from a firm. Drawing on psychology theory, we predict and find that concrete language increases investors’ feelings of comfort in their ability to evaluate an investment. Our study contributes to the literature on how language choices in disclosures affect investors’ judgments by demonstrating that a simple, yet potentially powerful reporting tool of emphasizing concrete language may attract investors who may otherwise be reluctant to invest.

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APA-Format Citation

Elliott, W. B., Rennekamp, K. M., & White, B. J. (2015). Does concrete language in disclosures increase willingness to invest?. Review of Accounting Studies, 20(2), 839-865.

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