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
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.’