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The use and misuse of graphs in stand-alone annual reports evidence from Brazilian listed companies
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Previous studies have proven that graphs are often manipulated to feign a better and sometimes
unreal image of the company to investors and other users of annual reports, who rely on
graphical disclosure in their decision-making process. This paper uses hand collected data from
the reports of a representative sample of 57 Brazilian companies that belong to the Bovespa
Index in 2014, and presents an empirical analysis of the use and misuse of graphs in their annual
reports. Results not only reveal that the usage of graphs in annual reports is very important to
Brazilian companies, but also that there is evidence of measurement distortion (favorable
deviations for the companies) and presentational enhancement. In addition, the study shows
that the lower the corporate’s performance and governance, the higher the probability of
measurement distortion. Although there is no evidence of selectivity, the study proves that
companies with worse corporate governance are more likely to present this type of distortion.
This paper expects to address this issue to preparers and users of annual reports in the country,
and to draw attention of accounting regulatory institutions to formulate standard guidelines of
graphical disclosure to avoid misleading information through graphs.
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Palavras-chave
Use of graphs Misuse of graphs Graphical distortion Brazilian listed companies Annual reports