Financial Information Disclosure Readability and Its Communication Effectiveness

Public policies aimed at consumer welfare are typically established to eliminate important market problems. One of the urgencies people feel about efficiency and credibility of the financial marketplace is information asymmetry between financial companies and average consumers and lack of market transparency and efficiency. With this backdrop, this experimental study tested whether and how the readability of financial information disclosure had an effect on the decision quality of financial consumers. In light of information remedy and financial disclosure regulation, financial decision quality for this experiment was operationalized as the recognition and amount of processing of financial disclosure information. The independent variables was the readability of financial disclosure information and the moderators were financial knowledge and elaboration on potential outcome. Results indicated that the readability of financial information disclosure would help average financial consumers more accurately remember and more amount of key claims and information of financial products. In addition, elaboration on potential outcome had an effect on the relationship between financial disclosure information readability and financial knowledge, supporting the notion of individual traits as a boundary condition in explaining and predicting the effectiveness of information intervention and communication strategies for financial consumer protection. No such moderating effect was noted for financial knowledge. This study concluded with a discussion of implications of these findings for designing and implementing public policy initiatives and consumer protection alternatives for better financial welfare.2