COVERING UP BAD NEWS

September 16, 2008
Michael Sheehan

Physician's Money Digest, March15 2003, Volume 10, Issue 5

If your company's financial newsis ugly, make your annual reportpretty. That's the conclusion reachedby a University of Michigan studythat asked executives to invest imaginarycash based on annual reportsthat contained good or bad financialnews, or sometimes none at all. Theexecutives shunned companies withshabby financials, as expected, butwhen the annual report containedmuddled fiscal data or none at all,participants tended to put theirmoney into the firms with the fanciergraphics. For the study, the researchersgleaned most of theseattention-grabbing visuals from theannual reports of companies withrun-down balance sheets, leadingthem to conclude that a classyannual report can help prop upinvestor confidence even in the faceof poor performance. Physician-investorsbeware.