Download or read book The Effect of a Cautionary Notice on Investors' Reactions to More and Less Readable Disclosures written by Lisa Koonce and published by . This book was released on 2018 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managers appear to strategically use discretion over disclosure language to reduce the effect of bad news and/or amplify the effect of good news. We test how a cautionary notice highlighting management's discretion over disclosure language affects investors' reactions to more and less readable disclosures. We find that a cautionary notice causes investors to reduce their valuation and investment desirability judgments when readability is consistent with management's incentives--that is, when bad news disclosures are less readable and when good news disclosures are more readable--but not when readability is inconsistent with a strategic motivation. Our results should be informative to regulators, given their interest in both promoting more readable disclosures and protecting investors.