Readability of bylaws and financial performance: evidence from Brazilian financial cooperatives
Arthur Frederico Lerner & Leonardo Flach
What the paper says
Purpose This study aims to examine how the readability of bylaws relates to the financial performance of Brazilian financial cooperatives. It investigates whether linguistic complexity functions as a mechanism of opacity, particularly in lower-performing institutions, as proposed by the management obfuscation hypothesis (MOH). Design/methodology/approach Readability is measured using file size, page count and the Fog Index (FOG). Financial performance is assessed via return on equity (ROE) and return on assets (ROA), using 2,427 cooperative-year observations from 2016 to 2022. The empirical strategy includes pooled ordinary least squares, two-stage least squares, quantile regression and propensity score matching (PSM). Findings Results partially support the MOH. File size and page count show a negative association with performance, especially in weaker cooperatives, though not consistently in PSM models. The FOG is positively associated with ROE, suggesting syntactic complexity may reflect legal formality rather than opacity. Effects vary across readability measures and performance levels. Research limitations/implications The readability measures focus on surface-level textual features and may not fully capture semantic or interpretive complexity. The study also does not evaluate how members engage with these documents in practice. Practical implications Shortening and simplifying bylaws may improve transparency and oversight, particularly in low-performing cooperatives. However, syntactic complexity can reflect legal or institutional maturity and should not be interpreted solely as obfuscation. Social implications Clearer bylaws support democratic governance and financial inclusion, particularly in underserved regions. Enhancing accessibility can foster participation, accountability and trust in cooperative institutions. Originality/value This study offers a novel dataset and methodologically diverse analysis, contributing to governance and disclosure research in non-English, emerging market contexts.
Evidence weight
Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40
| F · citation impact | 0.50 × 0.4 = 0.20 |
| M · momentum | 0.50 × 0.15 = 0.07 |
| V · venue signal | 0.50 × 0.05 = 0.03 |
| R · text relevance † | 0.50 × 0.4 = 0.20 |
† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.