The Readability of Company Responses to SEC Comment Letters and SEC 10-K Filing Review Outcomes

摘要: An emerging literature shows that shareholders benefit from the Securities and Exchange Commission’s (SEC) filing review process in terms of improved disclosures reduced information asymmetry. However, SEC reviews also impose significant costs on companies because comment letter remediation diverts substantial time resources away normal operations may result restated or amended filings. Applying processing fluency theory, we examine whether readability company’s initial response to an affects likelihood unfavorable outcomes process. Specifically, using Fog index, Flesch Reading Ease Index, Kincaid Index measure response, predict find less readable company responses are associated with longer times a higher files restatement amendment as review. Our results should be interest managers, boards directors, audit committees, other stakeholders involved formulating comments they suggest improving is relative easy inexpensive way for mitigate