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The Impact of Graph Slope on Rate of Change Judgments in Corporate Reports

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  • Vivien Beattie
  • Michael John Jones

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.

Suggested Citation

  • Vivien Beattie & Michael John Jones, 2002. "The Impact of Graph Slope on Rate of Change Judgments in Corporate Reports," Abacus, Accounting Foundation, University of Sydney, vol. 38(2), pages 177-199, June.
    • Handle: RePEc:bla:abacus:v:38:y:2002:i:2:p:177-199
    DOI: 10.1111/1467-6281.00104
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    Cited by:

    1. Jones, Michael John, 2011. "The nature, use and impression management of graphs in social and environmental accounting," Accounting forum, Elsevier, vol. 35(2), pages 75-89.
    2. Mather, Paul & Ranasinghe, Dinithi & Unda, Luisa A., 2021. "Are gender diverse boards more cautious? The impact of board gender diversity on sentiment in earnings press releases," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).
    3. Pennington, Robin & Tuttle, Brad, 2009. "Managing impressions using distorted graphs of income and earnings per share: The role of memory," International Journal of Accounting Information Systems, Elsevier, vol. 10(1), pages 25-45.
    4. García Osma, Beatriz & Guillamón-Saorín, Encarna, 2011. "Corporate governance and impression management in annual results press releases," Accounting, Organizations and Society, Elsevier, vol. 36(4), pages 187-208.
    5. Elodie Behnam, 2013. "La Lisibilite De La Communication Financiere En France : Le Cas De La Lettre Aux Actionnaires," Post-Print hal-01002368, HAL.
    6. Beattie, Vivien, 2005. "Moving the financial accounting research front forward: the UK contribution," The British Accounting Review, Elsevier, vol. 37(1), pages 85-114.
    7. Parsons, Linda M. & Tinkelman, Daniel, 2013. "Testing the feasibility of small multiples of sparklines to display semimonthly income statement data," International Journal of Accounting Information Systems, Elsevier, vol. 14(1), pages 58-76.

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