Article,
Obfuscation, Textual Complexity and the Role of Regulated Narrative Accounting Disclosure in Corporate Governance
Journal of Management and Governance, 7 (2): 187-210 (June 2003)
DOI: 10.1023/A:1023647615279
Abstract
This paper examines whether poorly performing companies use textual
complexity to obfuscatein the Operating and Financial Review (OFR)
andthus undermine effective communication and goodgovernance. Prior
research on the lsquo obfuscation hypothesis rsquo has reached confused
and contradictory conclusions. The OFR is a usefulobject for testing
the hypothesis because itssemi-regulated status provides a measure
ofcommonality of content while leaving scope forvariability in textual
complexity. This studyexamines whole texts, employs a larger numberof
variables and proxy measures than previousstudies, and uses regression
analysis, toovercome some of the possible causes ofinconsistency
in previous results. It concludesthat poorly performing companies
do notobfuscate by the use of textual complexity.OFRs are nonetheless
textually complex and byno means all this complexity can be attributedto
the complexity of the underlying activitiesto be described. The consequences
of thisfinding for regulators and researchers arebriefly examined.
The weakness of the evidencefor the hypothesised obfuscation by textualcomplexity
shifts attention to other forms ofobfuscation and some suggestions
for futureresearch are made.
Email: b.a.rutherford@ukc.ac.uk
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Tags
- communication
- corporate
- financial_review
- impression_management
- medgov,
- narratives
- obfuscation_hypothesis
- textual_complexity
