Title: The effect of earnings management on the complexity and length of corporate financial reporting text

The financial crises of the late 1990s further highlighted the value and importance of transparent and standard financial reporting. An analysis of what happened in Enron & WorldCom's crisis and scandal shows that managers use complex and lengthy disclosures to keep some of their information secret from investors and other stakeholders in order to not simply identify their bad news or bad performance in company reports. These managers render company's reports in an acceptable way to legal authorities, but in some cases, using lengthy disclosure makes it difficult to be analyzed by investors and stakeholders. Managers of companies that have applied earning management, even though they disclose good news, have an incentive to keep the ways of accessing this news secret. In other words, while the actual performance of the company is different from what is reported, managers have an incentive to make it more difficult for investors to identify earnings management behavior by making financial reports more complex and difficult.