The goal of this dissertation is to investigate the impact of presentation formats on nonprofessional investors’ impressions of firm performance in the context of digital annual reports. The dissertation implements a three-essay approach. Essay 1 examines whether the effect of positive/negative financial performance news on nonprofessional investors’ impressions of management and firm performance depends on whether the graphical display of that news is vivid or pallid. Conducting a 2 x 2 between-participants experiment with 470 participants from Amazon Mechanical Turk (M-Turk), I find that when the news is positive, presenting graphs vividly allows nonprofessional investors to have a more positive impression of management and firm performance. In contrast, when the news is negative, presenting graphs vividly has little effect on nonprofessional investors’ impressions. The essay informs regulators and practice by demonstrating that vivid graphical website disclosures can significantly affect the behavior of nonprofessional investors when the financial performance news is positive, but the effect is minimal when the news is negative. The essay also contributes to the financial disclosure literature by demonstrating the impact of graphical vividness in presenting financial performance information. Essay 2 conducts a 2 x 2 between-participants experiment with 565 participants from M-Turk. I investigate whether varying the user interactivity and graphical vividness of the presentation of non-financial good news counteracts bad news presented in the audited financial data. I find a positive effect of user interactivity when the graphical presentation of non-financial information is vivid but not when it is pallid. In mediation analyses, I find unexpected results in that user engagement negatively mediates the effects of user interactivity on nonprofessional investors’ perceptions of firm performance and investment-related judgments and decisions. Subsequent analyses indicate that user interactivity alone reduces nonprofessional investors’ satisfaction with digital annual reports, but the joint effect of user interactivity and graphical vividness overcomes this negative effect. These results have implications for designers of digital annual reports, investor groups consuming this information, and regulators concerned about the need for assurance on the (unregulated) non-financial disclosures in annual reports. Essay 3 studies whether using hyperlinks that connect summarized financial graphs with detailed financial statement information reduces the effect of graphical distortions on nonprofessional investors’ perceptions of firm performance. Using 385 participants from M-Turk, I find that while distorted graphs do bias nonprofessional investors’ perceptions of firm performance, the provision and use of hyperlinks to the underlying source information eliminate those effects (i.e., debias). Using the dual-process theory of cognitive processing (Kahneman and Frederick 2002; Evans 2006, 2008), I find that hyperlinks enhance the overriding effect of System 2 processing (i.e., analytical processing) on System 1 processing (i.e., intuitive processing) and indirectly reduce the decision-biasing effect of distorted graphs on nonprofessional investors’ perceptions. The study contributes to standard setting as well as financial reporting practice by providing empirical evidence that the SEC’s policy guidance on implementing hyperlinks has benefits to nonprofessional investors. Second, it contributes to both the literature on distorted graphs and hyperlinks by suggesting hyperlinking to source data as a technique to mitigate the effects of graphical distortions. The findings of the three essays have implications for the designers of digital annual reports, investor groups consuming this information, and regulators concerned about the need to standardize the presentation formats in digital annual reports and potentially require auditor oversight of graphical displays of both financial and non-financial data in these reports.

Submitted by Beatriz Lopez Nunez (beatriz.lopez.nunez@hotmail.com) on 2016-11-01T16:25:24Z No. of bitstreams: 1 Correct_FGV_Beatriz_LopezNunez_Final.pdf: 1662185 bytes, checksum: 503c9199ac7bb99534f37f9232fc2b7c (MD5) / Approved for entry into archive by Fabiana da Silva Segura (fabiana.segura@fgv.br) on 2016-11-01T16:41:46Z (GMT) No. of bitstreams: 1 Correct_FGV_Beatriz_LopezNunez_Final.pdf: 1662185 bytes, checksum: 503c9199ac7bb99534f37f9232fc2b7c (MD5) / Made available in DSpace on 2016-11-01T17:11:05Z (GMT). No. of bitstreams: 1 Correct_FGV_Beatriz_LopezNunez_Final.pdf: 1662185 bytes, checksum: 503c9199ac7bb99534f37f9232fc2b7c (MD5) Previous issue date: 2016 / Previous studies have proven that graphs are often manipulated to feign a better and sometimes unreal image of the company to investors and other users of annual reports, who rely on graphical disclosure in their decision-making process. This paper uses hand collected data from the reports of a representative sample of 57 Brazilian companies that belong to the Bovespa Index in 2014, and presents an empirical analysis of the use and misuse of graphs in their annual reports. Results not only reveal that the usage of graphs in annual reports is very important to Brazilian companies, but also that there is evidence of measurement distortion (favorable deviations for the companies) and presentational enhancement. In addition, the study shows that the lower the corporate’s performance and governance, the higher the probability of measurement distortion. Although there is no evidence of selectivity, the study proves that companies with worse corporate governance are more likely to present this type of distortion. This paper expects to address this issue to preparers and users of annual reports in the country, and to draw attention of accounting regulatory institutions to formulate standard guidelines of graphical disclosure to avoid misleading information through graphs. / Estudos anteriores já provaram que os gráficos são frequentemente manipulados para aparentar uma imagem melhor – e muitas vezes irreal – da empresa para investidores e outros usuários dos relatórios anuais, que dependem da divulgação gráfica em seu processo de decisão. Esta investigação se baseia em dados coligidos a mão dos relatórios de uma amostra de 57 empresas pertencentes ao Índice Bovespa em 2014, e apresenta uma análise empírica do uso e abuso dos gráficos em seus relatórios anuais. Os resultados deste estudo não só revelam que o uso de gráficos em relatórios é de extrema importância para as empresas Brasileiras, mas também evidencia nos gráficos distorção de medida (divergências a favor das empresas) e a violação de princípios em sua construção. Além disso, o estudo demonstra que quanto pior o desempenho e a governança corporativa da empresa, maior a probabilidade de distorção de medida nos gráficos. Apesar de não haver evidência de seletividade, o trabalho prova que é mais provável que exista este tipo de distorção nos gráficos dos relatórios das empresas com pior governança corporativa. Este estudo pretende abordar esta questão aos preparadores e usuários brasileiros de relatórios anuais e chamar atenção das instituições reguladores contábeis para que formulem diretrizes padrões para a divulgação gráfica com o objetivo de evitar informação enganosa através de gráficos.