Picture Content in Annual Reports Matters: Framing as a Strategy for Impressing Potential Investors

This study examines the association between a firm's economic situation and the use of pictorial content in its annual reports. In other words, we shed light on whether firms in a specific economic situation intentionally choose particular picture content for the illustrations in their annual reports. We argue that the content of pictures can be used as an additional disclosure instrument to highlight signals beyond objective financial data, that is, an attempt to moderate readers’ decision-making processes. Corporate disclosure can be designed at multiple levels of corporate communication to influence addressees’ perceptions. We analyse 4770 annual reports from FTSE-350 firms between 2000 and 2021 using Google Vision API's artificial intelligence to examine if this special form of corporate disclosure is affected by corporate economic performance. Our findings suggest that decisions about pictorial elements in annual reports are associated with firms’ economic situation. Our paper contributes to the integration of communication theory, behavioural finance and voluntary disclosure theory to comprehend the use of pictorial information in annual reports. This study broadens the rare evidence regarding information design choices in annual reports with a particular focus on picture usage. By acknowledging the interdependence between framing and voluntary disclosure, researchers and practitioners can refine communication strategies and interventions to promote honest and successful financial disclosure whilst also considering the various communication theory factors involved.