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What You Think You Know: The Effects of Prior Financial Education and Readability on Financial Disclosure Processing

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  • Taejun (David) Lee
  • TaiWoong Yun
  • Eric Haley

Abstract

Disclosures in advertising and other forms of marketing communication have been examined as a means to help consumers understand complex financial information and make more informed decisions regarding financial products and services. The authors extend inquiry into this supposition by looking at the readability of disclosures in relation to consumer financial literacy. In an experiment, it was found that while highly readable disclosures facilitate more accurate information processing for those with prior financial education, such disclosures might actually inhibit accurate processing for those without prior financial education. This suggests that policy cannot rely on mandated disclosure in marketing communications alone. Rather, disclosures in financial product or services communication can only be effective if such disclosures are paired with other forms of education leading to greater financial literacy.

Suggested Citation

  • Taejun (David) Lee & TaiWoong Yun & Eric Haley, 2017. "What You Think You Know: The Effects of Prior Financial Education and Readability on Financial Disclosure Processing," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 18(2), pages 125-142, April.
    • Handle: RePEc:taf:hbhfxx:v:18:y:2017:i:2:p:125-142
    DOI: 10.1080/15427560.2017.1276064
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    Cited by:

    1. Austin M. Miller & Samantha Snyder & Stacie A. Bosley & Sarah Greenman, 2023. "Income disclosure and consumer judgment in a multilevel marketing experiment," Journal of Consumer Affairs, Wiley Blackwell, vol. 57(1), pages 92-120, January.
    2. Bongini, Paola & Osborne, Francesco & Pedrazzoli, Alessia & Rossolini, Monica, 2022. "A topic modelling analysis of white papers in security token offerings: Which topic matters for funding?," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    3. O. Seizov & A. J. Wulf & J. Luzak, 2019. "The Transparent Trap: A Multidisciplinary Perspective on the Design of Transparent Online Disclosures in the EU," Journal of Consumer Policy, Springer, vol. 42(1), pages 149-173, March.
    4. Arora, Jagriti & Chakraborty, Madhumita, 2021. "Does the ease of reading of financial disclosures influence investment decision?," Economics Letters, Elsevier, vol. 204(C).

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