Discussion of "Annual report readability, current earnings, and earnings persistence''

Li [2008. Annual report readability, current earnings, and earnings persistence. Journal of Accounting and Economics, this issue, doi:10.1016/j.jacceco.2008.02.0031 finds that firms with losses, or with transient income, write annual reports with long sentences and big words. I begin by discussing some explanations for Li's primary results, using his more detailed results, along with the results of related papers, to assess the plausibility of those explanations. I then briefly discuss the 10-K's of a single company over the course of 3 years, to provide more detailed insight into what might drive the length and readability of annual reports. Finally, I present some possible directions for future research. (c) 2008 Published by Elsevier B.V.