Client Case Study

Strategy

The Economic Significance of Communicating Long-Term Plans for CECP

 

Client profile

The Strategic Investor Initiative (SII) is a coalition of leading companies and investors committed to re-orienting capital markets toward the long-term. SII convenes CEO-Investor Forums to provide a venue for CEOs to share their long-term strategic plans with audiences of long-term investors. Through leading research, SII assists companies in developing and communicating long-term plans that help inform the decisions of institutional investors.

The challenge

CECP’s Strategic Investor Initiative presents a solution to the structural gap and short-termism of corporate-shareholder communications by providing a platform for companies to share long-term information with their long-term investors. However, to date, there is little evidence demonstrating the real world impacts from engaging in dialogue about long-term plans.

Our solution

We constructed an event study and analyzed long-term plan presentations delivered by Fortune 500 companies to their investors during CECP’s CEO-Investor Forums, and examined the corresponding market reactions. We also provided guidance in the form of a framework for CEOs to produce better quality long-term plans, by disclosing more forward-looking information on specific themes and topics.

Key outcomes

Our analysis found that there is a measurable capital market reaction to CEO long-term plans, providing early evidence that institutional investors find the information decision relevant. Our research was featured in the Spring Edition of the Journal of Applied Corporate Finance.