Tobias Böhmer, Marco Muschallik, Jan Steinius-Gaukel: Changes in Textual Attributes due to Deregulation of Quarterly Reporting in Germany – An explorative Study


Different standard setters and regulatory authorities discuss the relevance of the comprehensibility of information provided in financial reports. They require a clear and concise presentation of such infor¬mation in order to make financial reports clearer and more understandable to investors and other stakeholders. Against this background, we analyze a unique sample of 234 firms listed in the Prime Standard segment of the Frankfurt Stock Exchange in Germany with regard to different textual attri¬butes of their quarterly financial disclosure. For these firms, regulatory requirements regarding their quarterly disclosure were relaxed. Thus, they get the opportunity to switch their quarterly reporting format from a full quarterly financial report to a less regulated and therefore more flexible quarterly statement. Our results show that the switch to a quarterly statement goes along with meaningful im¬provements in the reporting comprehensibility operationalized by readability and precision. These improvements in textual attributes are only partially attributed to a firm’s deliberate decision to im¬prove the narrative reporting style. Rather, the deletion of less readable and less precise constituents in quarterly statements drive the overall improvements.