Finance: What do financial analysts ask? (Part 3)

9 years ago - Published in Finance, Fundamental Analysis

Below the second part of the summary of our findings is shown:

·             Section S3 of our survey, dedicated to the development of guidelines and key performance indicators (KPIs) and risk (Kris), showed that among the factors most commonly cited by financial analysts are those connected with GRI (44,16% ), while with reference to the KPIs and KRIs a general usefulness was recognised (83.13%) but with a request from many analysts to limit the number of indicators and try to get a degree of standardization that allows for the development of specific indicators for the type of company rather than for the sector of industry.

·             Looking at the guideline principles set by IIRC that must be followed by companies to prepare the Integrated Report shown in the S4 Section it is possible to note a greater importance attached to principle n. 1 (business strategy) (60.42%) followed closely by  principle number 6 (reliability and completeness) (48,42%) and number 7 (consistency and comparability) (42.71%).What is surprising, perhaps, is the lower degree of relative importance attributed to the principle of connectivity (12.50%), and the skepticism expressed by financial analysts regarding the possibility of implementing operationally the connection between all the information through the formula of the Integrated Report;

·             Section S5 that is devoted to the analysis of capital resources shows that even financial analysts agree with IIRC in the classification of the resources that are used by companies for value creation into six separate areas where by far the greatest relative importance with a percentage of 98, 97% is attributed to financial capital while a low relative importance equal to 84.84% is attributed to natural capital;

         With reference to the three dimensions of  intangible assets, as regards human capital and its relationship with the level of business performances, great importance is given by financial analysts to the leadership of top management (49,43%), even though a limited number of analysts believes that this information is easily obtainable from the companies (14.12%), and a very high risk (53.49%) is perceived regarding an inadequate capacity of the Board of Directors and an inability of the independent directors to perform an activity of control.

         Among the intangible resources which fall into the dimension of structural capital that have an impact on the performance of the organization by far the highest score is attributed to business strategy (51.76%) and research and development activities (35,29% ) even though financial analysts are very skeptical about the possibility of obtaining this information directly from companies. With regard to the risks that fall into this dimension the main risks have been attributed to the inability to identify the risks inherent in the business model and those that may have an impact on the corporate reputation (41.86%).

         Section S6 was dedicated to sustainability ratings and the trustworthiness of the non-financial information. More than a third of the Financial Analysts survey respondents (39.08%) indicated a limited expectation regarding the acquisition of relevant non-financial information through the sustainability ratings in order to assess the capacity of companies to create value in the short, medium and long-term;

·             Finally, in the last section S7, the opinion of the financial analysts was asked as to which are considered the main benefits to be derived from the availability of an Integrated Report. Among the possibilities, the opportunity to evaluate future performance (32,18%) comparability (33.33%) and the accessibility of information (31.40%), are judged very favorably. On the other hand financial analysts showed themselves skeptical about the possibility of reducing the costs inherent in the acquisition of information.

Part 1

Part 2

 

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®