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Decorated Annual Reports: The Effect of Visual Embellishments and Numeracy on Investor Judgments and Decisions

Sat, October 15, 10:30am to 12:00pm, TBA

Abstract

In firms’ digital annual reports, the financial performance graphs may be decorated with visual embellishments (e.g., icons) to attract investors’ attention. This study examines how visual embellishments in financial performance graphs and the numeracy of investors influence investment-related judgments and decisions. Conducting a 2 x 3 x 2 between-participants experiment with 500 participants from Prolific, we find interaction effects between news valence, visual embellishments, and numeracy. When visual embellishments are absent or at a low level, highly numerated nonprofessional investors have a stronger reaction to negative news than less numerated nonprofessional investors. However, this effect is muted when visual embellishments are at a high level or when the financial performance news is positive. Our study contributes to graphical vividness, visual embellishments, and numeracy literature. The study also contributes to the impression management literature and regulators by demonstrating the consequences of visual embellishments on investors with different numeracy levels.

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