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Alternative Market Briefing

Companies use 'creative' accounting tactics to attract Institutional investors

Monday, November 25, 2019

Laxman Pai, Opalesque Asia:

82 percent of global institutional investors believe companies in their portfolio often resort to legal but 'creative' accounting tactics to attract or satisfy investors, causing investors to increase scrutiny over portfolio company financials.

A global survey of institutional investors by BlackLine, reveals the financial practices that raise red flags for investors, as well as the factors they rely on to make informed investment decisions.

The survey covered over 760 institutional investors across the world to establish their attitudes to financial risk, due diligence and reporting.

Creative accounting, where companies exploit financial loopholes to present figures in a legal though misleadingly favorable light, was identified as a major concern for the global investor community.

Not only do the majority of investors believe that these tactics are commonplace at their portfolio companies, but 91 percent believe that more large companies will resort to these techniques over the next 12 to 18 months.

Investors expect global recession in 12-18 months

Worryingly, 83 percent of investors surveyed also agreed on the likelihood of a global recession in the next 12 to 18 months, meaning businesses will need to work even harder to outstrip the competition.

However, companies should think twice before trying to manipulate their figures; a quarter (25%) of investors singled out evidence of creative accounting as the ......................

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