Do Images Provide Relevant Information to Investors? An Exploratory Study

63 Pages Posted: 8 Nov 2021 Last revised: 23 May 2023

See all articles by Azi Ben-Rephael

Azi Ben-Rephael

Rutgers Business School - Rutgers University

Joshua Ronen

New York University (NYU) - Department of Accounting

Tavy Ronen

Rutgers Business School -Newark and New Brunswick, Department of Finance & Economics

Mi Zhou

Virginia Commonwealth University

Date Written: November 18, 2021

Abstract

We introduce the concept of “visual-readability” in annual reports and use novel machine learning
algorithms to construct visual-readability metrics. We innovate by creating a novel measure of content reinforcement, representing the information content investors can extract from images, complementing and reinforcing particulars contained in the textual narrative. An increase in visual prevalence and in the degree to which images convey reinforcing information is associated with greater (lower) analyst forecast accuracy (disagreement) in subsequent quarters. Effects of visual readability are distinct from those of textual readability. Using Kelly and Ljungqvist (2012)’s identification, we find that firms increase the use of visuals when facing an exogenous drop in analyst coverage. Our metrics are further associated with lower risk, lower cost-of-equity, and higher credit ratings during the subsequent year. In the age of information overflow, our results highlight the importance of visual readability for information assimilation.

Keywords: Visual readability, annual reports, images, information dissemination, information reinforcement, textual readability, analyst forecast accuracy, analyst disagreement

JEL Classification: D83, G12, G14, M41

Suggested Citation

Ben-Rephael, Azi and Ronen, Joshua and Ronen, Tavy and Zhou, Mi, Do Images Provide Relevant Information to Investors? An Exploratory Study (November 18, 2021). Available at SSRN: https://ssrn.com/abstract=3954219 or http://dx.doi.org/10.2139/ssrn.3954219

Azi Ben-Rephael (Contact Author)

Rutgers Business School - Rutgers University ( email )

HOME PAGE: http://https://sites.google.com/site/abenreph

Joshua Ronen

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
Suite 10-180
New York, NY 10012-1118
United States
212-998-4144 (Phone)
212-995-4599 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~jronen/

Tavy Ronen

Rutgers Business School -Newark and New Brunswick, Department of Finance & Economics ( email )

1 Washington Park
Newark, NJ 07102
United States
973-353-5272 (Phone)

HOME PAGE: http://https://www.business.rutgers.edu/faculty/tavy-ronen

Mi Zhou

Virginia Commonwealth University ( email )

301 West Main Street
Richmond, VA 23284
United States

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