Do Images Provide Relevant Information to Investors? An Exploratory Study

• In Event: Doctoral Student Faculty Interchange III

Abstract

We introduce the concept of \visual-readability" in annual reports and use novel machine-
learning algorithms to construct visual-readability metrics: visual use and information-content-
reinforcement (the degree to which information content in images reinforces text). We nd
that increased news coverage and asset growth are associated with increased visual use. In
turn, increased visual use is associated with subsequent-year realizations: lower risk and cost-
of-capital, increased institutional holdings, and higher bond ratings, market share, and ROA.
Further, the degree of information-content-reinforcement is associated with subsequent lower
analyst disagreement and greater forecast accuracy. By and large, our results are consistent
with an information-based story.

Authors

• Mi Zhou, Virginia Commonwealth University

• Azi Ben-Rephael, Rutgers, The State University of New Jersey

• Joshua Ronen, New York University Stern School of Business

• Tavy Ronen, Rutgers, The State University of New Jersey