The use of graphs in disclosing financial information in corporate annual reports represents a significant dimension of management’s disclosure strategy. This paper reviews previous research into financial graphs since the 1970s. The most commonly graphed financial variables are sales, profit, EPS and shareholders’ fund. Research evidence shows that graph use is contingent upon favourable performance. Prior studies also reveal that graphs are used extensively in the developed countries such as U.S.A., Canada, U.K. and Australia.
Keywords: Corporate annual reports; Disclosure; Graphs; Graphical Information; signaling theory.
Research in financial reporting has mainly focussed on the disclosure issue in two main categories of information, namely mandatory and voluntary disclosure. The majority of researchers pursuing such research endeavours normally use the annual reports as their main sample of studying corporate behaviour or practices. The use of annual reports in accounting research is also much more preferred due to its easy access or availability and also because it is the main output of a company's financial accounting system. Although information regarding a company can be obtained from various sources, one of the most important and valued sources is the annual report (Hines, 1982; Vergoossen, 1993; Naser and Nuseibah, 2003). It acts as a valued means of communication between an enterprise and its stakeholders. For example, shareholders would envisage that information conveyed to them is clear and precise. In addition, annual reports also function as public relations tools which portray corporate image and signal specific messages. Furthermore, corporate reports serve as effective marketing tools as if they are brochures or leaflets describing the activities and performance of the companies concerned (Beattie and Jones, 1993; Holliday, 1994). In...