What are French institutional investors interested in before launching out and injecting several hundreds of thousands or millions of euros? This is the question that BlackLine sought to answer in a study conducted last July among 750 institutional investors, 101 of whom were French.
And if the financial growth forecasts of companies (48%) and market trends (43%) are, unsurprisingly, immediately cited by French investors, the potential growth of the targeted company’s sector of activity is only looked at in 32% of cases in France (compared to 46% globally). Also, poor financial management and the presence of a risk of financial non-compliance do not seem to be of crucial importance to French institutional investors (22% versus 31% globally).
Conversely, specific criteria may dampen investor interest. For example, more than one-third of French respondents say they might choose not to invest in a company if it had to make adjustments after reporting. The presence of financial risk (31%) and a lack of clarity of roles and responsibilities within the management team (29%) are also sharply pointed out. A company needs to have a good, established hierarchy to ensure that information flows and responsibilities are appropriately allocated.
These initial data show that, beyond the numbers, trust in the company and its credibility are two critical factors embodied by adequate financial controls. “The figures tell the story of the company, if they are false, it can make people think that we wanted to lie,” explains Lucie Bordelais, Development Director at BlackLine.
Financial control as a mirror of corporate credibility
Whether French or foreign, more than 9 out of 10 investors believe they need proof that the company is managing its finances properly, presenting accurate financial reports and having visibility into its financial data in real-time.
Moreover, 22% of French institutional investors admit that they would not invest in these financial controls failed, compared with only 14% internationally. A third of them would impose changes on the company, “which could lead to friction with companies that, in general, do not like to be constrained,” according to Lucie Bordelais. For 26% of them, it would be more recommendations than obligations, while another quarter would choose to do further research. This is, therefore, a critical criterion that does not necessarily mean no investment.
“To invest, you have to have confidence in the economy but also in businesses,” emphasizes Lucie Bordelais. This is confirmed in reality, with 65% acknowledging that they have full confidence in the data issued by companies while, at the same time, “creative” accounting (to meet investors’ expectations or to make themselves more desirable) is a widespread practice, of which nearly 9 out of 10 investors are fully aware. “Even if these are legal practices, in theory, institutional investors do not appreciate the fact that companies take advantage of financial loopholes to present their figures in a falsely favourable manner and try to appease them,” explains Lucie Bordelais, Regional Vice President, BlackLine France.
But if there is an error in the financial report, the credit given to the company can quickly crumble. Indeed, 7 out of 10 investors announce a loss of confidence in the company, while 55% would even try to withdraw from their investment. 80% of them believe that this is the responsibility of the CEO, who has the corporate mandate of the company. The CFO is little questioned in France (21%), while internationally, he is guilty of 38% of investors.
Will AI replace investors tomorrow?
The subject of new technologies also affects the sphere of finance. While some software such as BlackLine can automate specific tasks such as auditing, artificial intelligence has not yet found its place in the investment sphere. Thus, 48% of investors note a lack of maturity of these technologies, an idea shared by Firas Abou Merhi, a partner in charge of the financial advisory team at Mazars.
Nevertheless, 52% of investors believe that AI-controlled bots will one day be able to calculate the best investment opportunities, and 48% think that it will be ready, coupled with the Learning machine, to provide more detailed information (compared to 69% worldwide).
Despite the lack of enthusiasm of the French on this point, these technologies should not be neglected. According to Jean-Claude De Vera, Chairman of AgileGBS and Co-Chairman of the DFCG Île-de-France, “technologies already allow us to perform repetitive tasks that a man would not want to perform,” thus giving people time to tackle more in-depth analyses.
