Investors’ confidence in U.S. public companies grows

BY KEN TYSIAC

Investors’ confidence in investing in U.S. public companies—and in audited financial information released by those companies—has risen to a seven-year high in 2014.

According to the Center for Audit Quality’s (CAQ’s) Main Street Investor Survey, 80% of 1,049 investors surveyed said they have some, quite a bit, or a great deal of confidence in investing in U.S. publicly traded companies.

That’s a rise of one percentage point over the previous year, and the highest portion recorded since the question was first asked in the survey in 2008.

“We think it’s a very interesting and compelling story,” CAQ Executive Director Cindy Fornelli said during a teleconference with reporters, “reflecting an increasing sense of optimism and confidence about the U.S. economy, U.S. markets, U.S. public companies, and many of the key players in our system.”

The CAQ is affiliated with the AICPA. Investors represented in the survey handle their household’s investments and live in households with more than $10,000 in investments. The survey was conducted in August.

The portion of investors who indicated that they have at least some confidence in audited financial information released by U.S. public companies rose three percentage points from last year to 75%. That’s the highest mark since the first year of the survey in 2007, when 80% of investors indicated confidence in audited financial information before the financial crisis.

“When asked about which parties [investors trust]—those that are charged with looking out for their interest—auditors come in first place,” Fornelli said. “… And I think there’s a parallel there, obviously.”

Investors reported more confidence in many entities—including auditors—that are responsible for looking out for investors. All six of the most-trusted groups in this year’s survey saw rises in investor confidence for at least the second straight year. These included:

  • Independent auditors who audit public companies (75% confidence, up from 72% in 2013 and 70% in 2012).
  • Independent audit committees of public companies (71% confidence, up from 69% in 2013 and 65% in 2012).
  • Financial advisers and brokers (70% confidence, up from 69% in 2013 and 66% in 2012).
  • Stock exchanges (70% confidence, up from 55% in 2013 and 50% in 2012).
  • Financial analysts (68% confidence, up from 65% in 2013 and 63% in 2012).
  • Credit rating agencies (64% confidence, up from 57% in 2013 and 54% in 2012).

The portion of respondents indicating at least some confidence in U.S. capital markets grew four percentage points over the previous year to 73%, the highest mark since 2009.

Confidence in capital markets outside the United States remained significantly lower at 43%. That is one percentage point higher than last year, but still much lower than the early years of the survey. In 2007, for example, capital markets outside the United States had the confidence of 65% of investors.

Additional information from the survey:

  • Financial planners, advisers, or brokers—used by 72% of respondents—are the leading sources of information used by investors. Financial reports from publicly traded companies (57%), financial newspapers or periodicals (55%), and family, friends, and colleagues (55%) also are frequently used as sources of information.
  • The outlook for the sector or industry the company is in (essential to 43% of respondents) and historical stock performance (42%) were rated as the most important factors in investing decisions.
  • Operating in an environmentally friendly or socially responsible manner was rated as essential for investing decisions by more female investors (40%) than male investors (29%). And 54% of female investors described themselves as “pretty cautious,” compared with 47% of male investors.

Ken Tysiac ( ktysiac@aicpa.org ) is a JofA editorial director.

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