Ex-military CEOs and readability of financial reports

In this study, we examine the effect of ex-military Cheif Executive Office (CEO)s on the readability of 10-Ks. Using the Bog Index as a measure of readability, we find that firms run by ex-military CEOs have much more readable financial reports, mainly because of the words used in these financial reports. Ex-military CEOs also have a moderating effect-we find that their leadership lessens the adverse effects of loss and business complexity on the 10-K's readability. These results are consistent with the view that ex-military CEOs resist the temptation to obfuscate negative news and may communicate complexity in operations more clearly. Overall, our findings indicate a possible behavioral explanation for why some firms have more readable annual reports.