The Effects of Different Parts of the Annual Report on Potential Investors' Attitudes Towards the Company and on the Corporate Reputation

Research problem: Both the function and the appearance of annual reports have changed over the last few decades. These multimodal reports now include many types of information that serve different functions. In this study, the effects of several information types on stakeholders' attitudes toward annual reports and the companies that published them are measured.

Literature review: Not much is known about how stakeholders read annual reports. The literature is not conclusive on the relative importance of several information types in these reports. Most studies investigate the impact of part of the information in annual reports and ignore the combined impact of the information types. Whether the potential investors are more affected by the financial review, the future strategy narrative or by pictures, such as a picture of the CEO, is unknown.

Methodology: An experiment (2 × 2 × 2 between subjects design) was conducted to test the effects of a good financial review versus a poor one, a good future strategy versus a poor one and a picture of the CEO smiling versus that with a serious facial expression. The effects on potential stakeholders' attitudes toward the information, on their attitudes toward investing in the company, and on their perceptions of the corporate reputation are measured.

Results and conclusion: The results show significant effects of all three information types. A good financial review, a good future strategy, and a serious facial expression have beneficial effects on the potential stakeholders' attitudes and on the corporate reputation. More important, however, the results show that the information types should be aligned with each other. A smiling facial expression, for example, is only beneficial if the content of the other information types is good.