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A comparative study of the use of financial graphs in the corporate annual reports of major U.S. and U.K. companies

Research output: Contribution to Journal/MagazineJournal articlepeer-review

Published
<mark>Journal publication date</mark>02/1997
<mark>Journal</mark>Journal of International Financial Management and Accounting
Issue number1
Volume8
Number of pages36
Pages (from-to)33-68
Publication StatusPublished
<mark>Original language</mark>English

Abstract

The use of graphs to disclose information in corporate annual reports represents a significant dimension in financial disclosure management. Surprisingly, no inter-country comparative analysis of this area of voluntary disclosure has been conducted. This study compares the graphical reporting practices in the 1990 annual reports of 176 leading U.S. and U.K. industrial companies. Ninety-two per cent of U.S. companies use graphs compared with 80% of U.K. companies; the mean number of graphs per company being 13.0 and 7.7, respectively. Sales, an earnings measure, earnings per share and dividends per share are the four most frequently graphed aggregate financial performance variables in both countries. Significant differences in several of the variables graphed are found and explained in terms of environmental factors. In both countries, evidence of graphical information manipulation exists in the form of selectivity, measurement distortion, and presentational enhancement. Moderate evidence supports the hypothesis that U.K. companies are more likely than U.S. companies to adopt interpretative shading. Regulators need to clarify the responsibilities of directors and auditors by setting graphical guidelines.