What the Market Wants

Corporate reporting has evolved over time, as have the media and the type of information listed, most of which was not previously included in corporate disclosure. Road shows, press releases, web strategies are among the most common means to get the information across. In terms of content, next to the balance sheet various kinds of information we have been added to express corporate value. This has made financial reporting richer, but also less structured. And since business information is useful only if it is relevant, accurate, verified and timely, in recent years the need has emerged to optimize voluntary disclosure by identifying a shared qualitative framework to that gives a sense of the information provided.

The development of integrated reporting follows such path and seeks to give a kind of accounting capable of expressing a company's financial, environmental and social performance and its governance in a summary statement. Bocconi in collaboration with PwC has created a survey with the aim of assessing the existing chasm between the supply and demand of market information. From the survey, conducted among Italian companies listed on the Milan Stock Exchange (the companies interviewed represent approximately 40% of total market capitalization) and financial analysts (48% of respondents over the total), it emerges that such information gap exists. The results highlight the significance of corporate information, but also its heterogeneity, in terms of perceived value. Companies seem to prefer to supply qualitative and time-series data, with respect to business model, risk management, CSR, Key Performance Indicators (KPIs) and prospective data. A significant number of companies do not publish data on CSR and the industry's KPI, and are sketchy in comparing their performance with that of competitors or the market. In reference to integrated reporting, 52% of interviewees say they have not yet extended reporting beyond the legal minimum required, since they do not perceive the benefits of doing so, although 35% of the managers polled are ready to implement integrated reporting in the coming years. On the analyst side, there is a widespread need for more information, with a marked preference for (quantitative?) financial indicators, industry-specific KPIs and prospective data. Surprisingly, analysts show they have much less interest in indicators pertaining to business climate or company culture.

The survey enables the drawing of some conclusions. Firstly, there is a gap between the demand and supply of information, which may mean that corporate value is inaccurately determined. Secondly, the information released and the way it is processed and assessed by the market are heterogeneous. This aspect makes it hard to give a proper valuation of the information provided or lack thereof (its absence still holds informational value). Finally, stakeholders wish to read a company's voluntary disclosure according to a structured model, which is typical of integrated financial reporting.