All that glitters is not gold? Evidence from annual report aesthetics and stock price crash risk

Abstract

This study investigates whether the visual aesthetics of annual reports affect future stock price crash risk. Using a sample of Chinese A-share listed firms from 2007 to 2024, we apply a multimodal large language model to annual reports to construct a novel measure of report aesthetics. We find that firms with highly aesthetic annual reports experience significantly lower future crash risk. This negative relationship remains robust to a range of robustness and endogeneity tests. Mechanism tests suggest that report aesthetics are associated with better corporate governance, reduced managerial myopia, increased market attention, more efficient information processing, enhanced transparency, and less bad news hoarding. Finally, cross-sectional analyses reveal that the mitigating effect of report aesthetics on crash risk is more pronounced for firms facing higher technological complexity and lower default risk.