Featured Research

from universities, journals, and other organizations

Handsome annual reports cause investors to value company higher

Date:
August 23, 2011
Source:
University of Miami
Summary:
As firms begin the 2011 annual report process, they may want to pay closer attention to the way those reports look. A recent study found that investors, regardless of their experience, place a higher value on firms with attractive annual reports than they do on those that produce less attractive reports.

As firms begin the 2011 annual report process, which many do at this time of year, they may want to pay closer attention to the way those reports look. A recent study out of the University of Miami School of Business Administration found that investors, regardless of their experience, place a higher value on firms with attractive annual reports than they do on those that produce less attractive reports. The study found that annual reports that utilize more color are perceived to have at least one percent higher annual revenues than those with lackluster designs.

"The role of aesthetics in consumer goods like those you'd find on store shelves has been widely studied, but our research is novel in that we look at this effect in the extreme context of financial decision-making and what we find is just how boundless the role of aesthetics can be," said Claudia Townsend, assistant professor of marketing at the University of Miami School of Business Administration, who conducted the research with Suzanne Shu of the UCLA Anderson School of Management. "Better-looking documents produce increased pride of ownership for a company, and this pride increases valuation. People are not aware of the effect of aesthetics on their financial decisions and we found that when their attention was drawn to this issue they were able to overcome the bias and make wiser investments."

Researchers conducted a series of three studies: one with finance students, one with members of the general population, and one with more experienced investors. Respondents in each study indicated that the design of a firm's annual report would be of little significance in their valuation of a company. But after reviewing the first few pages and/or a sampling of annual reports, participants rated firms with more attractive reports higher than those with less attractive reports. Specifically:

  • In the student study, in which participants were given the first three pages of two annual reports with the same financial information, the students priced the stock shares of a firm with the more attractive annual report nearly 70 percent higher than shares of a firm with the less attractive report.
  • In the general population study, respondents gave the product of a company with a more attractive annual report an average rating of 5.08 on a seven-point scale versus a rating of 4.79 for the product of a company with a less attractive annual report.
  • In the study involving experienced investors, in which participants were asked to rank companies based on how likely they would be to invest in those firms, the findings suggested that including an additional color throughout a firm's annual report would have the same impact on an investor's firm ranking as a 20 percent improvement in revenue from the previous year.

"The implications of these findings should point firms in the direction of good graphic designers," added Townsend. "After all, it is a lot easier to add color to a printed piece of paper than to add revenue to a company's bottom line."


Story Source:

The above story is based on materials provided by University of Miami. Note: Materials may be edited for content and length.


Journal Reference:

  1. Claudia Townsend, Suzanne B. Shu. When and how aesthetics influences financial decisions. Journal of Consumer Psychology, 2010; 20 (4): 452 DOI: 10.1016/j.jcps.2010.06.013

Cite This Page:

University of Miami. "Handsome annual reports cause investors to value company higher." ScienceDaily. ScienceDaily, 23 August 2011. <www.sciencedaily.com/releases/2011/08/110823154041.htm>.
University of Miami. (2011, August 23). Handsome annual reports cause investors to value company higher. ScienceDaily. Retrieved September 1, 2014 from www.sciencedaily.com/releases/2011/08/110823154041.htm
University of Miami. "Handsome annual reports cause investors to value company higher." ScienceDaily. www.sciencedaily.com/releases/2011/08/110823154041.htm (accessed September 1, 2014).

Share This




More Science & Society News

Monday, September 1, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Thailand Totters Towards Waste Crisis

Thailand Totters Towards Waste Crisis

AFP (Sep. 1, 2014) Fears are mounting in Bangkok that poor planning and lax law enforcement are tipping Thailand towards a waste crisis. Duration: 01:21 Video provided by AFP
Powered by NewsLook.com
California Passes 'yes-Means-Yes' Campus Sexual Assault Bill

California Passes 'yes-Means-Yes' Campus Sexual Assault Bill

Reuters - US Online Video (Aug. 30, 2014) California lawmakers pass a bill requiring universities to adopt "affirmative consent" language in their definitions of consensual sex, part of a nationwide drive to curb sexual assault on campuses. Linda So reports. Video provided by Reuters
Powered by NewsLook.com
As Drought Continues LA "water Police" Fight Waste

As Drought Continues LA "water Police" Fight Waste

AFP (Aug. 29, 2014) In the midst of a historic drought, Los Angeles is increasing efforts to go after people who waste water. Five water conservation "cops" drive around the city every day educating homeowners about the drought. Duration: 02:17 Video provided by AFP
Powered by NewsLook.com
Who Could Be Burnt by WHO's E-Cigs Move?

Who Could Be Burnt by WHO's E-Cigs Move?

Reuters - Business Video Online (Aug. 28, 2014) The World Health Organisation has called for the regulation of electronic cigarettes as both tobacco and medical products. Ciara Lee looks at the impact of the move on the tobacco industry. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins