Claudia Townsend of the University of Miami School of Business Administration and Suzanne Shu of the UCLA Anderson School of Management conducted three studies -- one with finance students, one with members of the general population and one with more experienced investors.
Respondents in all three studies indicated that the design of a firm's annual report would be of little significance in their valuation of a company.
However, 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, the researchers say.
"Better-looking documents produce increased pride of ownership for a company and this pride increases valuation," Townsend says in a statement.
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 vs. a rating of 4.79 for the product of a company with a less attractive annual report.
In the study involving experienced investors, the findings suggest 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 study says.
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