Document Type

Article

Publication Date

2026

DOI

10.1111/acfi.70269

Publication Title

Accounting & Finance

Volume

Advance online publication

Pages

1-26

Abstract

This study examines whether firms strategically adjust the readability of Item 1A (“Risk Factors”) disclosures following data breaches. Using U.S. firm-year observations from 2006 to 2023, we find that data breaches are associated with a significant decline in Item 1A readability. This decline is not accompanied by a meaningful increase in informational content; instead, post-breach disclosures exhibit higher syntactic complexity, more positive tone, and lower textual similarity to prior and industry peers' filings, consistent with strategic obfuscation rather than transparent reporting. The readability decline is amplified among firms facing higher litigation risk but attenuated among firms with stronger reputations for technological innovation. Notably, less readable disclosures soften negative market reactions, suggesting that obfuscation works as investors are challenged to fully process risk related information buried in complex language. These findings demonstrate that firms use narrative complexity for impression management following adverse events, with real capital market consequences.

Rights

© 2026 The Authors

This is an open access article under the terms of the Creative Commons Attribution 4.0 International (CC BY 4.0) License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

Data Availability

Article states: "The data used in this study are publicly available from recognized databases."

ORCID

0000-0002-9428-0562 (Tuo)

Original Publication Citation

Tuo, L., & Han, S. (2026). Lost in the language: Data breaches and the strategic fog of risk disclosures. Accounting & Finance. Advance online publication. https://doi.org/10.1111/acfi.70269

Additional Files
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