The joint effect of animated graphs and motion verbs on investor judgments

Abstract

Within the context of accounting disclosures, firms often have significant control over the manner in which data is presented and the language used to present these disclosures. I examine two features of the disclosure setting. I predict that the use of animated graphs or static graphs in accounting disclosures can influence investor investment judgments, but the effect of this depends on the type of language used in the disclosure. I experimentally test my prediction using an investor day transcript in which the graphs used are either animated or static, and the language used either contains motion verbs or does not. I further add two additional control conditions in which I keep the vividness of the language low in order to examine the effects of animated or static graphs. As predicted, I find that animated graphs result in more favorable investment judgments than when static graphs are used, but only when used in conjunction with motion verbs. I run a second experiment to examine the cognitive processes that underpin the findings in Experiment One, but the results of Experiment Two suggest that the cognitive processes leading to the findings occur unconsciously. I identify a new data visualization feature in the accounting disclosure setting, the animation of graphs, and how it influences investor judgments.