Seeing is Believing: Annual Report 'Graphicity' and Stock Returns Predictability

48 Pages Posted: 29 Dec 2020 Last revised: 29 Mar 2021

See all articles by Wesley Deng

Wesley Deng

University of Tasmania

Lei Gao

George Mason University

Bo Hu

George Mason University

Guofu Zhou

Washington University in St. Louis - John M. Olin Business School

Date Written: November 1, 2020

Abstract

Using a large hand-collected dataset, we provide novel evidence on the additional information embedded in the designs and graphs of financial reports. We find that firms that add graphic financial reports experience a positive 2.7% abnormal returns in the following 3 to 6 months. The finding remains after controlling for financial market constraints, investor sophistication, and information asymmetry. We also develop a theoretical model to explain the result. Further analysis reveals that firms with lower accruals, larger size, and higher Fog index tend to add graphic information, and they are likely to increase their corporate investments in the following year.

Keywords: Graphic Financial Reports, Reporting Format Change, Soft Information, Anomaly

JEL Classification: G02, G11, G12, G14

Suggested Citation

Deng, Xiaohu and Gao, Lei and Hu, Bo and Zhou, Guofu, Seeing is Believing: Annual Report 'Graphicity' and Stock Returns Predictability (November 1, 2020). Available at SSRN: https://ssrn.com/abstract=3723126 or http://dx.doi.org/10.2139/ssrn.3723126

Xiaohu Deng

University of Tasmania ( email )

Tasmanian School of Business and Economics
Private bag 84
Hobart, TAS 7001
Australia

Lei Gao

George Mason University ( email )

Fairfax, VA 22030
United States

HOME PAGE: http://sites.google.com/view/lei-gao/home

Bo Hu

George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

Guofu Zhou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

Washington University
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6384 (Phone)
314-658-6359 (Fax)

HOME PAGE: http://apps.olin.wustl.edu/faculty/zhou/

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