S’pore-listed firms should deal more transparently with investors to build trust, unlock value: Study

SINGAPORE - Some stock market investors in Singapore care more about how companies plan and execute their strategies than how much cash they return to shareholders, a study found.

The study by the Stewardship Asia Centre (SAC) also found that most shareholders are willing to overlook short-term underperformance if firms can communicate their long-term plans clearly.

Yet, fewer companies have caught on, highlighting a greater need for closer alignment in investor relations even as efforts are ramped up to restructure other areas of the local stock market to boost liquidity and investor confidence, SAC said in a report released on Oct 28.

SAC is a non-profit organisation dedicated to enabling business growth and societal prosperity. It is a beneficiary of Temasek Trust, which is the philanthropic arm of Temasek.

Its study focused on engagement between corporates and institutional investors and its impact on influencing capital allocation and long-term company value.

The study’s findings are based on a survey of 220 responses, spanning 110 investors and 110 corporations. The survey was conducted online from July 28 to Aug 31.

Of the 110 corporate responses, 85 were from Singapore Exchange-listed companies and 25 from companies intending to list on the SGX.

SAC’s report, released in partnership with the Monetary Authority of Singapore (MAS), also found that most respondents

believed transparent, high-quality engagement not only builds trust

between companies and their shareholders, but can also influence valuations.

Findings showed that nine in 10 investors and companies agree that engagement affects valuation decisions. Notably, 95 per cent of investors said they are willing to tolerate short-term underperformance if companies are able to communicate a clear and credible long-term strategy.

The report also revealed the importance of investors and companies being aligned on their motivations. While 25 per cent of investors surveyed ranked company strategy as their top concern, only 14 per cent of corporations recognised this. Instead, most corporations believe dividends are investors’ main priority.

Additionally, 29 per cent of investors viewed management vision and execution as “very significant” in shaping their investment view, but only 16 per cent of corporations recognised this.

Such misaligned expectations can reduce dialogue to a box-ticking exercise, especially in firms where controlling shareholders may view investor input as marginal, SAC said, adding that better engagement “builds trust, reduces perceived risk and strengthens reputation”.

It noted, though, that companies must set realistic expectations, as “even strong engagement cannot replace structural market limitations”.

While more than 80 per cent of SGX-listed companies meet major investors at least once a quarter, regular engagement does not always lead to higher valuations, as factors such as the price at which investors bought shares, market liquidity and overall market sentiment continue to influence valuation outcomes, SAC said.

To mitigate further differences and align expectations amid these constraints, progressive companies tailor engagement by investor type, stake and horizon, to ensure interactions are purposeful and strategic.

Both investors and corporates need to treat engagement as a two-way, long-term partnership, rather than as a compliance exercise or a quick route to valuation gains, said SAC’s report.

“Investors can signal priorities upfront, while companies can clarify the purpose and scope of each engagement. This creates more intentional, constructive dialogue and reduces frustration on both sides.”

Engagement bridges information gaps, builds conviction and can positively impact valuation, cost of capital and growth potential, said Mr Kee Rui Xiong, executive director of MAS’ corporate finance and disclosures department.

“The findings (of the report) support the idea that while market success is driven by fundamentals in terms of price and performance, effective shareholder engagement boosts trust and confidence and can thus play an important complementary role,” said Mr Kee at the launch of SAC’s report on Oct 28.

Investors also value clarity, honesty and consistency over complex reporting, the study found. Nearly half the investors surveyed reported the lack of timely information as a key challenge, despite most disclosures being deemed useful.

SAC’s research aligns with the objectives of the MAS equities market review group, which seeks to strengthen the competitiveness of the local stock market, facilitate growth and foster investor confidence. One of the areas the review group is looking to improve is investor relations.

Alongside the report’s findings, SAC created an accompanying playbook – developed with contributions from practitioners – outlining practical principles to improve engagement between investors and listed companies.

One of the methods recommended in the playbook is for companies to practise structured investor meeting discipline and documentation by using consistent briefing agendas so that investors know what to expect.

Companies should also actively engage investors by having regular analyst and investor briefings after earnings releases and major corporate developments.

Interviewees for the report also suggested that, in the longer term, digital tools such as investor apps can help to enhance accessibility.

“We hope SGX-listed companies will see the playbook as a useful tool in strengthening trust, transparency and long-term value creation” said SAC chief executive Rajeev Peshawaria.