Held in partnership with Creating Connections. Held in partnership with Creating Connections This...
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- Slide 1
- Held in partnership with Creating Connections
- Slide 2
- Held in partnership with Creating Connections This document has
been prepared for general guidance on matters of interest only, and
does not constitute professional advice. You should not act upon
the information contained in this document without obtaining
specific professional advice. No representation or warranty
(express or implied) is given as to the accuracy or completeness of
the information contained in this document, and, to the extent
permitted by law, PwC, IIRC or their licensors do not accept or
assume any liability, responsibility or duty of care for any
consequences of you or anyone else acting, or refraining to act, in
reliance on the information contained in this document or for any
decision based on it. Copyright 2014. All rights reserved.
Permission is granted to make copies of these slides, provided that
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line: "Copyright 2014. All rights reserved. Used with permission of
the IIRC and PwC. In this document, PwC refers to the PwC network
and/or one or more of its member firms, each of which is a separate
legal entity. Please see www.pwc.com/structure for further details.
IIRC refers to the International Integrated Reporting Council.
Acknowledgements of third party source materials are contained on
the relevant slides.
- Slide 3
- Held in partnership with Creating Connections Developing good
reporting what do investors expect? Hilary Eastman Head of Global
Investor Engagement, PwC
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- Held in partnership with Creating Connections Overview
Introductions What is the typical path of a company as they move
towards ? What are the market related impacts of the move towards ?
Panel discussion what are the benefits of companies moving towards,
to themselves, their analysts and investors?
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- Held in partnership with Creating Connections What is the
typical path of a company as they move towards ? Erik Roelofsen
Professor of International Financial Reporting and Capital Market
Communication, Rotterdam School of Management, Erasmus
University
- Slide 6
- Held in partnership with Creating Connections The 4 major
cohorts Based on our analysis of PwC benchmarking data for the
FTSE100 over a 5 year period, 4 main cohorts of reporters emerged
Minimalists Sustainability reporters AugmentersLeaders
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- Held in partnership with Creating Connections Minimalists
Attract a lower analyst following Characteristics: Reporting
quality is low on all disclosure dimensions Particularly poor on
KPIs Tend to focus on financial reporting Often relatively smaller
firms
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- Held in partnership with Creating Connections Sustainability
reporters Higher analyst following than minimalists Attracting
mainstream and specialist sustainability analysts Characteristics:
Do well in sustainability and risk reporting Somewhat behind in
most other areas Large firms
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- Held in partnership with Creating Connections Augmenters
Slightly higher analyst following than minimalists But lower than
sustainability reporters Characteristics: Reporting quality is high
in all dimensions Tend to be somewhat behind on sustainability More
focus on strategy and financials than sustainability reporters Tend
to be large firms
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- Held in partnership with Creating Connections Leaders Attract
the highest analyst following Characteristics: Very high scores on
all dimensions of reporting Very strong on KPIs in particular
Largest firms Only 4% of annual reports in this category (of the
FTSE100 across the 3 year period)
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- Held in partnership with Creating Connections How do companies
typically develop over time? Minimalist Augmenters Sustainable
Leader 72% 7% 20% 1% 28% 58% 11% 3% 15% 42% 46% 29% 14% 18%
36%
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- Held in partnership with Creating Connections What are the
market-related impacts of the move towards ? Jennifer Sisson
Investor Engagement, PwC
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- Held in partnership with Creating Connections Voluntary
non-financial disclosure and the cost of equity capital Dhaliwal et
al, 2011 Based on firms initiating CSR disclosures from 1991 - 2007
Firms initiating CSR disclosures attract dedicated institutional
investors and analyst coverage if they have superior social
responsibility performance Moreover, these analysts achieve lower
absolute forecast errors and dispersion
- Slide 14
- Held in partnership with Creating Connections Haggard et al,
2008 Based on a study of firms voluntary disclosures from 1982
1995, looking at 2,084 firm year observations Includes annual
reports, quarterly reports and investor relations disclosures The
more effective a firms disclosure policy, the lower the cost of
firm specific information to investors This leads to more firm
specific information being reflected in stock prices Expanded
voluntary disclosure effectively reduces stock price co-movement
which is not driven by fundamental factors and reduces the
incidence of stock price crashes Enhanced voluntary disclosure
reduces stock price co-movement
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- Held in partnership with Creating Connections PwCs Investment
Professionals survey 2014
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- Held in partnership with Creating Connections My perception of
the quality of a companys reporting impacts my perception of the
quality of its management A) 50% B) 80% C) 90% We take a dim view
of companies that report badly. It tends to be poorly governed
companies that report badly, so we will be more sceptical when it
comes to a capital raising or debt issuance Companies that report
better are more likely to get long term investment. % includes all
respondents who agreed or strongly agreed with the above statement
80%
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- Held in partnership with Creating Connections When companies
present information clearly and concisely, I feel more confident in
my analysis A) 45% B) 67% C) 82% A long and rambling report can
suggest a lack of management focus Good reporting in my view shows
management have good attention to detail. % includes all
respondents who agreed or strongly agreed with the above statement
82%
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- Held in partnership with Creating Connections A) 75% B) 87% C)
91% If a company is stable and I am planning to hold the shares
long term, then I wait for the annual report, rather than focus on
the preliminary earnings announcement, as the annual report has
more of a long-term perspective. I typically review the Annual
Report/10K/20F of companies that I follow % includes all
respondents who agreed or strongly agreed with the above statement
91%
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- Held in partnership with Creating Connections Disclosures in an
annual report about strategy, risks and opportunities and other
value drivers can have a direct impact on a companys cost of
capital A) 35% B) 63% C) 72% They [disclosures in an annual report
about strategy, risks and opportunities and other value drivers]
are important because they impact your view of management, and that
impacts your decisions on whether or not you might invest It can
also impact any kind of risk premium that you want to apply, when
you are thinking about long term cash generation. 63%
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- Held in partnership with Creating Connections Panel discussion:
what are the benefits of companies moving towards, for their
analysts and investors? Hilary Eastman PwC Investor Engagement
Martijn Bos Policy advisor reporting & audit Eumedion Rui Mota
Guedes Head of European Equity Strategy MainFirst Bank AG Marietta
Miemietz Co-founder and Director of Pharmaceutical Advisory
Primavenue
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- Held in partnership with Creating Connections