Suzanne Shu, Claudia Townsend (Ph.D. '10): Attractive Annual Reports Increase Profits

In a forthcoming paper for the Journal of Consumer Psychology, UCLA Anderson Assistant Professor of Marketing Suzanne Shu and University of Miami Assistant Professor Professor of Marketing Claudia Townsend (Ph.D. '10) have found that the aesthetics of a financial firm's annual reports impact profitability. The paper has garnered media attention in advance of its publications.

Townsend and Shu conducted three studies -- one with finance students, one with members of the general population and one with more experienced investors.

Respondents in all three studies indicated that the design of a firm's annual report would be of little significance in their valuation of a company.

However, after reviewing the first few pages and/or a sampling of annual reports, participants rated firms with more attractive reports higher than those with less attractive reports, the researchers say.

"Better-looking documents produce increased pride of ownership for a company and this pride increases valuation," Townsend says in a statement.

According to Shu, the paper actually blended the research interest of her and Townsend, who first worked together when the latter was studying at UCLA Anderson. A central application of Shu's research is in explaining how consumers make decisions about financial products such as mortgages, annuities, personal savings, and investments; Townsend studies the aesthetics of consumer products (a topic she discussed in this Anderson podcast). "We suspected that the aesthetics mattered regarding financial products, even if consumers were not conscious of it," Shu told the UCLA Anderson Blog. "It has to do with risk taking. People who saw nicer aesthetics were more likely to invest. Once you feel affiliated with aesthetics, you can build your self-affirmation. You become more open to arguments in favor of investing in that company."

Shu's message to marketers at financial services companies is clear. ""This actually makes their lives easier. Your bosses don't want to spend extra money on annual reports, but but adding that extra color to the annual report boosts profits. If you invest a little more, push towards higher aesthetics, it give you an immediate payoff."