On Friday at the “SEC Speaks” conference, Securities and Exchange Commissioner Troy Paredes observed that the information companies disclose to investors leads to “disclosure overload” that hampers the ability of investors to gauge the importance of the data. Commissioner Paredes went on to say “what we need is a top-to-bottom review of our disclosure regime.”
At CrowdCheck, we agree with Commissioner Paredes. The value of disclosure is significantly increased when presented in a readable format that does not overwhelm the investor. While the information presented in an opaque document may be the same as that of a readable document, the impact is very different.
In a paper by Kristina Rennekamp of the University of Illinois at Urbana-Champaign, the author found that investors are more likely to feel as though they can rely on a disclosure that is more readable. After all, if a company does not seem like it is trying to hide the truth beneath a mountain of jargon, the potential investor is more likely to believe the company is not trying to hide information.