This study aims to test the obfuscation hypothesis in the nonprofit sector by examining how annual report text complexity relates to the public support of large charities. When their donations are low, charities may have the incentive to communicate in ways that deliberately or unknowingly conceal their weak public support.
This study evaluates text complexity by using a measure of readability from computational linguistics and by using the amount of information content in annual report length. This study measures public support using a charity’s donation intensity. The authors anticipate and find that annual reports of charities with weak public support are more difficult to read and have less information content.
Overall, the findings demonstrate that the public support of a charity is reflected in its linguistic practices and the textual characteristics of its external reports, and that text complexity may communicate or obfuscate information depending on the public support of a charity.
Future research is needed to determine if the results are generalizable to different types of charities across the globe, using other text-level characteristics and using documents other than the annual report.
Donors and other resource providers should be aware of the tendency in nonprofit communication to obfuscate rather than communicate poor fundraising performance.
To the best of the authors’ knowledge, this study is one of the few to examine the relationship between nonprofit public support and the linguistic properties of their texts. Furthermore, the obfuscation hypothesis has primarily been tested in the for-profit sector.
