Expanding shareholder bases internationally is a top priority for global companies; Social media used by only 27% of firms to engage investors
Systemic market and political risk, followed by the uncertainty of new financial regulation, are the top issues named by companies as impacting global market confidence, according to the latest annual investor relations (IR) survey conducted by BNY Mellon, a global leader in investment management and investment services.
Roughly three-out-of-four of all respondents rated systemic risk, political risk, and levels of government regulation as important issues affecting market confidence. While Eurozone issues are no longer the top concern for companies globally, as last year's survey revealed, they remain the greatest concern for firms based in Western Europe, followed by political risk. Latin American companies, however, point to government regulation as their chief worry.
The importance of expanding shareholder bases internationally remains a key priority for companies globally, with 45% reporting this among their prime goals, up from just 17% in 2010. Western Europe leads this trend with 59% of companies reporting international diversification of investors as their main priority, with emerging Asia and the Middle East close behind (54% and 53%, respectively). Energy companies are the most active in targeting investors outside their home markets (58%) and consumer staples the least (37%).
Developed as a benchmarking tool for BNY Mellon's depositary receipt clients, the survey, Global Trends in Investor Relations, looks at how publicly traded companies are managing their IR practices and the issues affecting them. This year's report is based on survey results from nearly 700 respondents across 63 countries that span the range of market cap and industry sectors, including financials, industrials, consumer, technology and healthcare.
"Global markets are showing resilience, albeit with significant differentiation between regions," said Christopher M. Kearns, CEO of BNY Mellon's Depositary Receipts business. "Looking ahead, investors continue to be wary about the effects of systemic risk, politics and regulation on the world's markets and how they'll perform. In response to these challenges, we're seeing more firms seeking to boost their international shareholders and diversify their investor base. Depositary receipts remain a crucial tool for companies in both traditional and emerging markets to source new pools of capital."
Other key findings of the survey include:
- Companies reported a growing proportion of active investors in their shareholder base for the second year running. Thirty-six percent of companies reported a rise in active investors in 2013, compared to 26% in 2012. Roughly half of all Asian and Latin American firms saw a jump in active investors, which may reflect a more selective approach to investing in those regions.
- Only 27% of companies overall use social media to engage investors. Western European firms are the most advanced in this area, with 45% using social media. The top social media tools are Twitter/Stocktwits, followed by mobile apps and Facebook. Developed Asia is the most reluctant region, with only 6% of respondents using any form of social media for IR purposes.
- Just 23% of companies globally believe the sell-side should be compensated for providing investors with access to senior management. Firms in North America (36%) and Western Europe (29%) were most in favor of compensating the sell-side for corporate access.
- Companies are taking a more formal approach to managing potential risk when communicating with the capital markets: Over the last four years, companies with formal crisis communications policies in place has risen from 31% in 2010 to 52% in 2013. In terms of social media, 49% of firms have policies governing internal use of these channels, up from 42% in 2012.
- Twenty-four percent of boards of directors have met with investors in the last 12 months. Furthermore, 72% of companies believe there is tangible value in direct board and investor dialogue, as opposed to only 28% believing there should be no interaction.
- More investor relations officers (IROs) see a direct link between their performance and pay. Companies are using more qualitative over quantitative metrics to evaluate IR performance, such as informal feedback from the investment community and the quality of information in analyst reports.
"The imperative for companies to maintain an active, engaged investor relations program has never been greater," said Guy Gresham, head of the Global IR Advisory team in BNY Mellon's DR group. "Our IR specialists continue to work closely with clients in all regions to support and maximize their outreach when targeting new investor communities."
This is the ninth annual investor relations survey conducted by BNY Mellon's DR team.