Finance: What do financial analysts ask? (Part 2)
The theme of the definition of a new tool for Corporate Reporting is a topic that in recent years has been gaining an increasingly importance for managers, consultants and financial analysis. Annual Reports are often too long, many of the pieces of information given are not related to each other, high gaps in communication remain and investors, institutional lenders, management and more generally stakeholders believe that a large part of the information that is disclosed is not adequate to facilitate their decision-making process.
These same limitations can also be ascribed to the Sustainability Reports in as much as they rarely show how the performance of social responsibility is incorporated into the business strategy and into the processes of value creation.
But what would financial analysts like to know in particular? Below the first part of the summary of the main answers to our questionnaire is shown:
· In the first section S1 of the questionnaire potential factors of influence on the outcomes of the responses related to the profile of respondents have been highlighted, such as the category of activity of financial analysis to which the analyst claims to belong, the distinction between the traditional analyst and the ESG analyst, the type of company that is the subject of financial analysis, whether listed or not and the number of years of experience of the analysts.
· The second section S2 of the questionnaire is devoted to giving an overview of Integrated Report and the "value relevance" of non financial information in relationship to one of the benefits expected from the Integrated Report, which provides access to this data, limiting an information gap that, in fact, inevitably affects the process of evaluation of companies by financial analysts. On this point there is widespread appreciation on the part of analysts who responded to the questionnaire and there is also general recognition of the importance of non financial information disclosure. Financial Analysts expressed the view that the "privileged" users who are more interested in having integrated information on an organization’s ability to create value over time are investors (90.72%), financial analysts themselves (81,44%) and banks (53.61%), while a much smaller percentage is attributed to other categories of stakeholders such as suppliers, associations and experts in basic economic and financial issues. Not surprisingly, a percentage of 83.51% of the analysts acknowledge that the Integrated Report as well as being a tool of corporate reporting for the external communication of information can also be used as a tool for internal communication of information to the Board of Directors. Integrated Reporting is indicated as a corporate reporting tool which is among the most used in the acquisition of non-financial information (41.25%) compared to the Sustainability report (17,72%), especially for companies operating in the consumer services (66.67%), health care (65.79%) and industrial (64.47%) sectors. Finally financial analysts were asked to indicate what non-financial information is most relevant in order to make a reasoned judgment on the purchase / sale of a security and a large majority indicated information on company strategy (76,40 %) and subsequently that related to innovation (44.94%) and to reputation (38.20%).
Authors
Federica Doni PhD, Ricercatore confermato in Economia Aziendale Dipartimento di Scienze Economico-Aziendali e Diritto per l'Economia Università degli Studi di Milano-Bicocca Andrea Gasperini Dottore Commercialista in Milano, socio AIAF Responsabile del gruppo di lavoro Mission Intangibles®