Journal article

Linguistic Complexity in Firm Disclosures: Obfuscation or Information?

Brian J Bushee, Ian D Gow, Daniel J Taylor



Prior research generally interprets complex language in firms’ disclosures as indicative of managerial obfuscation. However, complex language can also reflect the provision of complex information; for example, informative technical disclosure. As a consequence, linguistic complexity commingles two latent components—obfuscation and information—that are related to information asymmetry in opposite directions. We develop a novel empirical approach to estimate these two latent components within the context of quarterly earnings conference calls. We validate our estimates of these two latent components by examining their relation to information asymmetry. Consistent with our predictions, we find ..

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University of Melbourne Researchers


Funding Acknowledgements

Accepted by Christian Leuz. We thank Lauren Cohen, Mirko Heinle, Feng Li, Tim Loughran, Rabih Moussawi, Luis Palacios, Eddie Riedl, Robert Verrecchia, Yuxing Yan, two anonymous reviewers, and seminar participants at Boston University, Cubist Systematic Strategies LLC, Florida International, George Washington, UC-Irvine, the University of Minnesota Empirical Accounting Conference, University of Toronto, and University of Zurich for useful discussions, comments, and programming advice. We gratefully acknowledge the financial support of the Harvard Business School and of the Wharton School. An online appendix to this paper can be downloaded at