The FINANCIAL — 80% of investment professionals agree that the quality of a company’s reporting impacts their perception of management quality. Nearly two-thirds of investment professionals (63%) say that the quality of a company’s reporting could have a direct financial impact on its cost of capital, according to PwC.
82% of respondents say when companies report information clearly and concisely, they feel more confident in their analysis. Explaining the business model is an important part of high-quality reporting. 70% of investment professionals primarily want business model explanations to focus on how a company generates cash and generates value that will become cash in the future.
80% of investment professionals told us that in order to be meaningful, an explanation of a company’s business model needs to link to its overall strategy. Only 14% of investment professionals think that companies generally disclose enough information on future strategic plans for them to feel comfortable with the judgements they need to make, according to PwC.
There are a number of ‘effectiveness gaps’ in the reporting of key risks to the business model. Investment professionals want to know how these risks are managed or mitigated. However, although understanding management’s view of potential risks and their mitigation strategies is important, too much boilerplate disclosure is impeding that understanding.
Investment professionals like to see linkage between different elements of company reporting. 87% say that clear links between a company’s strategic goals, risks, KPIs and financial statements is helpful for their analysis. The annual report remains a valuable source document, not only for financial information but also in relation to governance matters and environmental, social and human capital topics. It is also important for explaining strategy, risks and opportunities. The reliability and comprehensiveness of the annual report are its key strengths. 91% of investment professionals said they typically review the annual reports of companies they follow, according to PwC.
Discussion about this post