Investor Expectations in Value Based Management by Magdalena Mikołajek-Gocejna

Author:Magdalena Mikołajek-Gocejna
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

Financial performance

72 %

Quality of risk management process

49 %

Transparency

46 %

Quality of reporting

33 %

Product innovation

27 %

Independence from large financial institutions

18 %

Size

14 %

Source: PricewaterhouseCoopers (2008: 9)

In Poland, the evaluation of the IR quality takes into account above all: quality of information about the future and strategy, adequacy of received information to investors’ needs, IR competences, and management’s competence and involvement (Dziawgo 2011: 253).

Due to the shifting architecture of the global capital market and the resulting changing conditions under which analysis are conducted and investment decisions are made, sources of value are placed in the synergic coexistence of tangible and intangible assets. It follows that in the creation of investors’ expectations and decision making process, apart from the financing structure and a company’s financial situation, increasingly often the following factors are taken into consideration: the economic context of a company’s operations, the nature of the capital market (or markets) where a company’s securities are listed, the nature of the industry/sector as well as the products and services market, the efficiency of the internal IT network, customer satisfaction, and broadly defined intellectual capital. Individual investors more and more often claim that their decision to commit capital in a particular company’s stock is affected by nonfinancial factors, such as the market position, company’s reputation and brand, corporate strategy, executives’ resumes, expansion plans and future investments, the sector and microeconomic environment, opinions about a company on independent web portals, signed contracts, rotations in the governing bodies, financial investor’s interest, ownership, analysts’ comments, the level of trust for a company, psychology, intuition, and sentiment (Dziawgo 2011: 240).

The results presented above lead to an obvious conclusion: there exists an urgent need to modify existing corporate models of information policy and reorient them towards meeting information expectations of investors and other stakeholders. It is particularly significant since investors themselves assert that effective information policy is of considerable importance for the creation of their expectations about a company’s performance, and thus it constitutes foundations on which they base their decision to invest capital in particular companies’ stock. They are also prepared to pay premiums for the shares of companies which are more open when it comes to information disclosure.9

Financial reporting framework incompatible with investor expectations leads to the creation of communication gaps among the following types can be discerned (Eccles et al. 2001: 130–141) (see Fig. 4.8):

Fig. 4.8Gaps in communications system. Source: Eccles et al. (2001: 130)

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