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CC BY-NC-ND V4.0, Open Access
Dissertation
Do Visuals Matter? Analyzing the Readability of Tabulated Financial Data in the Annual Report
Washington State University
Doctor of Philosophy (PhD), Washington State University
05/2024
DOI:
https://doi.org/10.7273/000006487
Abstract
This study leverages information manipulation theory to investigate the association between decreased readability (obfuscation) of tabulated financial data within the annual report and deception. Using a sample of over 9,000 firm-year observations, I leverage artificial intelligence to automatically classify financial tables within the 10-K and a novel method of measuring visual readability to determine if accruals earnings management and real-activities management are significantly associated with the readability of tabulated financial data. Results demonstrate that firms with higher levels of accruals management and that meet or just beat prior year earnings tend to have tabulated financial data within the 10-K, and in particular the audited financial statements, that are less readable. Results also provide evidence that firms with higher levels of real-activities management tend to have tabulated data within the supplementary disclosures of the audited financial statements that are less readable. Furthermore, firms that restate their financial statements with the filing of an 8-K or that are subject to an investigation by the Securities and Exchange Commission also have audited financial statements that are less readable, and the dollar magnitude of such restatements for specific accounts varies proportionately with the increase in visual complexity for the primary financial statement tied to that account. Taken together, these findings provide evidence that firms which are manipulating earnings consistent with the process and outcome of earnings management tend to have tabulated financial data that appears obfuscated. Furthermore, this obfuscation appears to be prevalent in both the reviewed sections of the 10-K and the audited financial statements.
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Details
- Title
- Do Visuals Matter? Analyzing the Readability of Tabulated Financial Data in the Annual Report
- Creators
- Daniel P. Ferguson
- Contributors
- Beau Barnes (Chair)M. Kathleen Harris (Committee Member)Ryan D Sommerfeldt (Committee Member)
- Awarding Institution
- Washington State University
- Academic Unit
- Carson College of Business
- Theses and Dissertations
- Doctor of Philosophy (PhD), Washington State University
- Publisher
- Washington State University
- Number of pages
- 92
- Identifiers
- 99901121440501842
- Language
- English
- Resource Type
- Dissertation