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The impact of graph slope on rate of change judgements in corporate reports

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>06/2002
<mark>Journal</mark>Abacus
Issue number2
Volume38
Number of pages23
Pages (from-to)177-199
<mark>State</mark>Published
<mark>Original language</mark>English

Abstract

The use of graphs to disclose financial information in annual reports represents a significant dimension of financial disclosure management. Statistical graphics studies demonstrate that the accurate visual decoding of a graph is contingent upon the graph’s slope parameter. This article reports two related studies into the slope parameter in a financial reporting context. A laboratory experiment indicates that sub-optimal slope parameters produce distorted judgments of corporate performance and an examination of the graphical formatting choices of 240 large U.K. companies indicates material departures from the optimal slope parameter. Policy implications are discussed.