Short and Sweet or Just Short? The Readability of Product Disclosure Statements

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aut.relation.endpage37
aut.relation.issue1en_NZ
aut.relation.journalAuckland Finance Lettersen_NZ
aut.relation.startpage27
aut.relation.volume6en_NZ
aut.researcherGilbert, Aaron
dc.contributor.authorGilbert, Aen_NZ
dc.contributor.authorScott, Aen_NZ
dc.date.accessioned2019-09-05T02:58:32Z
dc.date.available2019-09-05T02:58:32Z
dc.date.copyright2017en_NZ
dc.date.issued2017en_NZ
dc.description.abstractGiven the importance of information in making informed financial decisions, it is vital that investors are able to understand the information provided to them. With this in mind, in 2013, New Zealand legislators replaced the existing disclosure documents with the Product Disclosure Statement (“PDS”). The change was in response to large and complex disclosure documents from providers of new or ongoing sales of financial products. PDS documents have a strictly enforced word limit and are meant to be written in plain English to allow “prudent but non-expert” investors access to the information they contain. We compare the readability of the old prospectus and investment statements (the disclosure documents legally required before 2013) with the new PDS for a sample of superannuation mutual funds (referred to in New Zealand as KiwiSaver funds). We find that while the documents are definitely shorter, there have been mixed improvements in the readability of the documents. The main improvements are a reduction in the amount of finance terminology used, while the language in PDSs compared to investment statements is actually more complex, likely driven by the word limit. As a result, while investors require less finance knowledge, they appear to require a higher level of general education to understand the documents, potentially putting the information out of reach of over half the general population.
dc.identifier.citationApplied Finance Letters, 6(01), 27-37. https://doi.org/10.24135/afl.v6iI.79
dc.identifier.doi10.24135/afl.v6iI.79en_NZ
dc.identifier.urihttps://hdl.handle.net/10292/12792
dc.publisherAuckland Centre for Financial Research (ACFR)
dc.relation.urihttps://ojs.aut.ac.nz/applied-finance-letters/article/view/79
dc.rightsCopyright (c) 2017 Applied Finance Letters. Creative Commons License. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
dc.rights.accessrightsOpenAccessen_NZ
dc.subjectReadability; Financial disclosure; KiwiSaver
dc.titleShort and Sweet or Just Short? The Readability of Product Disclosure Statementsen_NZ
dc.typeJournal Article
pubs.elements-id328610
pubs.organisational-data/AUT
pubs.organisational-data/AUT/Business, Economics & Law
pubs.organisational-data/AUT/Business, Economics & Law/Finance
pubs.organisational-data/AUT/Business, Economics & Law/Finance/Finance PBRF 2012
pubs.organisational-data/AUT/Faculty of Business, Economics and Law
pubs.organisational-data/AUT/Faculty of Business, Economics and Law/Finance
pubs.organisational-data/AUT/PBRF
pubs.organisational-data/AUT/PBRF/PBRF Business Economics and Law
pubs.organisational-data/AUT/PBRF/PBRF Business Economics and Law/Faculty Review Team PBRF 2018
pubs.organisational-data/AUT/PBRF/PBRF Business Economics and Law/Finance Department PBRF 2018
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