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The Impact of Graph Slope on Rate of Change Judgments in Corporate Reports
Author(s) -
Beattie Vivien,
Jones Michael John
Publication year - 2002
Publication title -
abacus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.632
H-Index - 45
eISSN - 1467-6281
pISSN - 0001-3072
DOI - 10.1111/1467-6281.00104
Subject(s) - disk formatting , graphics , graph , econometrics , context (archaeology) , dimension (graph theory) , computer science , accounting , economics , mathematics , theoretical computer science , geology , combinatorics , paleontology , computer graphics (images) , operating system
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.