Impression management: the use of graphs in integrated reporting in South Africa.

Abstract

The use of graphs in annual reports has increased because of the shift in audience annual reports are aimed not only at shareholders but also at various stakeholders. As management decides what information to disclose in the annual reports, there may be a bias towards the graphs presented. Impression management techniques for presentation enhancement and obfuscation may be present in the graphs presented in annual reports. This study aims to investigate the use of graphs as a tool for managing impressions in annual reports of the top 40 South African Johannesburg Stock Exchange (JSE)-listed companies. This study focuses on the frequency, subject matter, and distortion of graphs presented in the integrated reports. A total number of 78 integrated reports were analysed over the period 2021 to 2023, the post- COVID-19 era. The findings of this study indicate that the disclosure of graphs in annual reports has grown over time. The types of graphs used are primarily straightforward to read, such as column graphs, pie charts, and bar graphs collectively. The number of non-financial graphs showed an upward trend, whereas financial (Key Financial Variable (KFV)) graphs (graphs related to sales and profit) declined significantly. The transition towards increased non-financial graph usage may indicate a shift in the disclosure landscape because of COVID- 19, and the effort to provide a more holistic view of company performance while managing stakeholder perceptions. Financial (KFV) graphs showed a GDI calculation rate of 48.7%, and of those, 56.6% were distorted, whereas other financial graphs (financial graphs other than those relating to KFVs) exhibited a distortion of 56.5%. Non-financial graphs exhibited the highest distortion at 61.3%. The rate of distortion showed an upward trend between 2021 and 2023, indicating a shift toward more aggressive impression management strategies, possibly aimed at restoring investor confidence in the aftermath of COVID-19. This implies that impression management tactics are more commonly employed during periods of reputational or financial risk. To mitigate the risk of financial loss, stakeholders are advised to scrutinise not only the financial statements but also graphs contained in integrated reports to detect any use of impression management in integrated reports.