Can numbers be trusted? How annual reports could look in the future

Dr Andreas Hellmann
Mal Chenu
8 May 2019
Macquarie Business School


New technology may soon replace questionnaires to delve deeper into our subconscious reactions to financial information, which could revolutionise the way annual reports are designed.

No matter how carefully you analyse financial information, your inherent biases may influence your understanding and could determine how you invest, says Macquarie University accounting researcher Dr Andreas Hellmann.

Perception: technology that measures how readers subconsciouly react to text, pictures, fonts, infographics and evennumbers is set to revolutionise the way annual reports are designed, says Dr Andreas Hellmann.

“There is a general perception that financial information is objective and value-free but people could be misled by the way information is presented,” says Hellmann, a senior lecturer in the Department of Accounting and Corporate Governance at Macquarie Business School.

“For example, graphs can attract an investor’s attention and be more easily retained in their memory than narratives. For this reason, graphs typically highlight favourable aspects of the performance of a company rather than unfavourable.”

In a recent study, Hellmann and colleagues investigated how the order in which financial information is presented in annual reports affects the way it is perceived.

The power of pictures

“Our research shows that if positive information is presented last, people will evaluate the performance of the company more highly," says Hellmann.

"So if you see information such as increases in financial profitability and a strong operating cash flow reported after information such as a declining share price and increases in costs, you are more likely to evaluate the company higher than if you saw it in the reverse order.

The human brain takes short-cuts in processing information and can handle only limited information, so natural biases come into play.

“People also tend to be influenced by certain pictures and will have an emotional reaction, regardless of the figures or text. People may view a sustainability report favourably if certain pictures accompany it, independent of any text.”

One of the areas he is currently investigating is how non-professional investors make decisions.

“In many situations people don’t make objective, rational decisions. The human brain takes short-cuts in processing information and can handle only limited information, so natural biases come into play and the brain processes information in a certain order."

Eye-tracking, brain monitoring and skin tests

"Essentially, the brain has to pick and choose what it retains. To test for this, we are using a biometric research platform to examine visual attention, individual perception and emotional valence and arousal in a business context," Hellmann says.

"The tests could reveal biases that exist beyond the interpretation of financial reports and the platform could also be used in marketing, advertising, management, accounting and finance.”

Our research may help investors appreciate their shortcomings when it comes to understanding large volumes of information.

For this reason, Hellmann plans to use biometric equipment, including eye-tracking devices, brain monitoring tools and skin conductance amplifiers to experimentally examine the influence of photographs on judgments non-professional investors make about company performance.

“The judgment and decision-making of professionals is one of the most fundamental aspects in business research. Our research is aiming to shed more light on broader behavioural implications. This may help investors appreciate their shortcomings when it comes to understanding large volumes of information," he says.

Numbers game: Natural biases come into play when investors process information.

"It may also help companies optimise their communications and provide regulators with further guidance on governing the way management commentary is presented in annual reports."

In a business context, Hellmann says, judgment and decision-making research has been subject to criticism because studies are typically based on self-report surveys, which can be biased.

"As a result, there are increasing calls for cross-disciplinary research to provide evidence on cognitive and mental processes that may drive judgments in a business context," he says.

"The Macquarie Business School is at the forefront driving this change. Our state-of-the-art biometric research platform enables researchers to use several biometric methods simultaneously."

Hellmann and his team are looking for volunteers to participate in studies and industry partners who want to find out whether an intended message is clearly conveyed to the relevant stakeholders.

Dr Andreas Hellmann Senior Lecturer in Accounting at The Macquarie Business School

Dr Andreas Hellmann is a Senior Lecturer in the Department of Accounting and Corporate Governance

To find out more about forming an industry/research partnership or to volunteer for the research project, contact Andreas Hellmann -


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