The Use of Financial Graphics as an Impression Management Tool: Evidence of Portuguese Listed Companies

The Use of Financial Graphics as an Impression Management Tool: Evidence of Portuguese Listed Companies

DOI: 10.4018/978-1-5225-7817-8.ch011
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The main objective of this chapter is to determine the graph discrepancy index and to analyze which factors can actually influence the graphical discrepancy index, based on the strategies of impression management. For this particular purpose, a content analysis of management and financial reports was made, from 2010 to 2015, of Portuguese companies with securities admitted to trading in Euronext Lisbon. Findings indicate that companies tend to engage in printing management practices, but it was not possible to identify the determinants of such practices since all the hypotheses were rejected.
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Prior literature has identified specific communication strategies of financial information followed by managers to influence the stakeholders’ decision-making process. These practices can be considered as manipulations and are designated in the accounting literature as impression management strategies (IM). According to Schlenker (1980), IM consists in trying to control, consciously or unconsciously, the perceptions of others, determining the consequences at the social level. To Hooghiemstra, (2000) it is a branch of social psychology that studies how individuals present themselves to others by giving them a favorable image.

When applied to financial reporting, IM strategies are seen as the set of procedures implemented by individuals (managers) in order to manipulate the perceptions others may have of the financial information disclosed, namely through specific legitimacy strategies (Carter & Dukerich, 1998). IM strategies are carried out because managers are aware of the relevance of financial information for the decision-making process of several stakeholders (Penrose, 2008).

In addition, IM strategies are enhanced by the fact that some reports are not subject to any kind of regulation requiring a consistent presentation by all companies. Thus, companies in an attempt to improve the external perception of financial information change the quantity as well as the type of information presented on a voluntary basis.

This voluntary information is commonly represented graphically. However, as graphics are not audited, there is room for IM actions. Thus, it is important to analyze whether companies use IM strategies in graphic representation to intentionally manipulate the stakeholder’s perception of organizational outcomes.

Grounded on legitimacy theory and attribution theory, we intend to evaluate the levels of IM strategies adoption through graphic representations and address the following research problem: do Portuguese listed companies use IM practices with graphic representation?

The study is based on a content analysis of the annual reports and accounts of 36 Portuguese companies listed on the Euronext Lisbon stock exchange regulated market during the period from 2010 to 2015. A qualitative methodology was used to calculate the graphical discrepancy index (GDI) together with quantitative methodology, specifically the multiple regression model for the analysis of IM determinants, and consequently the following research questions:

  • 1.

    Is there a graphics distortion in the annual reports and accounts of Portuguese companies listed on Euronext Lisbon stock exchange regulated market?

  • 2.

    How relevant is the graphical distortion found in these companies?

  • 3.

    Does company performance influence graphical distortion?

  • 4.

    What are the determinants of graphical distortion?

Findings allow the identification of IM practices through graphic representation. However, they do not allow corroborating the hypotheses developed.

This study aims to contribute to the increasing literature in the field, alerting users of financial information to the existence of IM strategies that can lead to wrong perceptions and decisions.

The present chapter is organized as follows: in the next background section we present a literature and develop hypotheses; then, we describe the research design, discuss the main results and finalize with conclusions, limitations, and further research pathways.



The concept of IM, also called “self-presentation, is an Anglo-Saxon expression, originating in the literature on psychology that: refers to the process by which individuals attempt to control the impressions others form of them. Because the impressions people make on others have implications for how others perceive, evaluate, and treat them, as well as for their own views of themselves, people sometimes behave in ways that will create certain impressions in others' eyes”. (Leary e Kowalski, 1990, p.1)

Key Terms in this Chapter

Stakeholders: Institutions or persons affected by reform.

Accounting Information: Information on accounting nature produced and disseminated by public or private entities.

Reporting: Activity related to the practice of the report.

Comprehensibility: The quality of comprehensible language or thought.

Impression Management: A process whereby someone tries to influence the observations and opinions of others about something. In a typical impression management process within a business, a manager might attempt to regulate and control information in their interactions with staff or the general public to give them the most favorable impression about their company and its objectives.

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