More disclosure boosts stock price

NEW YORK: Banks and insurance companies usually hold their cards close to the vest, but increased disclosure of non-financial, intangible information can boost their stock prices.

NEW YORK: Banks and insurance companies usually hold their cards close to the vest, but increased disclosure of non-financial, intangible information can boost their stock prices.

NEW YORK: Banks and insurance companies usually hold their cards

close to the vest, but increased disclosure of non-financial, intangible

information can boost their stock prices.



That was a key finding of a PricewaterhouseCoopers study that measured

gaps between the beliefs of CFOs and the investment community regarding

the importance of 29 performance measures and satisfaction with current

levels of disclosure.



For the study, PWC polled institutional investors, sell-side analysts

who cover the banking and insurance industries and CFOs of banks and

insurance companies worldwide.



While all parties agreed on the importance of most performance measures,

the CFOs placed significantly more focus on non-financial measures of

success such as brand equity and regulatory reputation.



But only a third of investors and analysts saw employee satisfaction as

important. ’Companies must convince the market that satisfied staff, and

similar non-financial outcomes, play an important part in creating

shareholder value,’ said John Fletcher, PWC partner and co-author of the

study.



IR expert Richard Torrenzano said that while increased disclosure would

benefit company valuations, it’s a lot easier said than done. ’The more

sunlight, the better it is for all investors,’ he said. ’But the

corporate community likes to keep things to itself.’



Torrenzano added that studies like this one don’t take into account the

costs involved with increased corporate disclosure. Fletcher, however,

responded, ’The benefits of greater transparency outweigh the costs.



It’s tough, but it’s not impossible.’



CFOs also said that there remain shortcomings in measurements of

intangibles such as brand equity.



’These shortfalls were not surprising, given that they require

hard-to-get external information,’ Fletcher said. To this, Torrenzano

responded, ’You have to look at quantitative things. We count in

numbers - it’s as simple as that.’



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