Are Summary Annual Reports Successful?

In 1987, the Securities & Exchange Commission approved a modified version of summary reporting. A selection of summary annual reports (SAR) were analyzed for their effectiveness in reducing information load and improving readability. Two quantifiable surrogates for information cues were selected - financial information pages and lines of financial statement data. Three variables that affect reading comprehension were used: 1. the use of the passive voice, 2. average word length, and 3. average sentence length. The results indicate that SARs are shorter, simpler documents compared to traditional annual reports to shareholders. However, other than a reduction in use of the passive voice, SARs show little of the expected improvement in readability. The data on changes in average word length and average sentence length are somewhat discouraging to those hoping for improved readability in SARs. The average word length was almost exactly the same for annual reports and SARs.