The Outsized Impact of Shareholder Confidence: FTI Consulting’s Corporate Issues Study
March 29, 2016 By Edward Reilly
From FTI Consulting’s Strategic Communications’ Proprietary Survey of More Than 300 Institutional Investors Worldwide:
Companies experience a broad variety of events, transactions and issues throughout their lifecycle – all of which can dramatically impact enterprise value. Smartly managing these critical inflection points can be the difference between success and failure in the eyes of investors, customers, the media and the public at large.
FTI Consulting Strategic Communications’ new proprietary Corporate Issues Study takes an in-depth look at these critical issues in a global survey of more than 300 institutional investors – a highly influential segment of the financial community that is often the primary arbiter of company valuation, performance and reputation.
In an online series to be published in installments over the coming weeks, we’ll take a closer look at key unifying themes that emerge from our study, which is based on survey responses regarding:
Kicking off our series today is the role investor confidence plays when it comes to evaluating the six issues above. As data from FTI Consulting’s proprietary 2014 Enterprise Value Study demonstrates, confidence is the key to influencing behavior among employees, customers, investors, governmental leaders and the public at large. It is confidence that drives action among stakeholders – employees to join or stay at a company, customers to buy products and services, investors to purchase and hold stock in the company, and policymakers and citizens to advocate for the company in their communities.
The data shows that when investors have confidence in a company, that company receives significant breathing room to operate, particularly when faced with a critical event, issue or transaction. This is especially true in CEO transitions and shareholder activism campaigns, where confidence plays an outsized role in determining success, according to our study.
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Confidence is built and retained through a variety of information sources from direct communications as well through third parties like media and sell-side analysts. For investors, the most influential means of building and retaining confidence is through direct, face-to-face engagement, as well as through other forms of direct communication (e.g., conference calls, press releases). This was also true in transaction settings including M&A, IPOs and spin-offs. However, when there is a crisis or regulatory change the media plays one of the most important roles in shaping opinions and driving confidence. In other words, when there is an issue like a crisis or regulatory change, investors will turn more to third-parties then to the companies themselves to help them form an opinion on the situation.
FTI Consulting Strategic Communications’ Corporate Issues Study was conducted among more than 300 institutional investors worldwide. To determine the impact of confidence on the perceptions and behaviors of investors, FTI Consulting developed a split sample survey approach whereby participants were randomly selected for two groups. This was done for each confidence related question. The questions posed to each group were identical with one exception: one group was asked to answer the question about companies they were confident in, the other about companies they were not confident in. Results were then compared and the differences (delta) between the means of both groups were calculated. Statistical analysis was then performed on the data to ensure that the differences were statistically significant at the 95 percent confidence level.