Feb. 16, 2006 • Volume 14 Number 11

Study Will Assess Investors' Use of Non-Financial Data

A $295,000 grant from the National Association of Security Dealers Investor Education Foundation will enable researchers from Boston College's Center for Corporate Citizenship to examine how non-financial performance measures can make corporate financial product information more meaningful to the investing public.

Assoc. Prof. Jeffrey Cohen (CSOM) and CCCR Senior Research Associate David Wood will oversee the research supported by the NASD grant.

Cohen, the principal investigator of the grant, was particularly gratified to receive the funding. "It's something I have been interested in throughout my whole career: getting to investors and making a difference," he said. "Perhaps they will use information on social issues or governance or on non-financial matters when they are making their investment decisions.

"You can talk a good game about the environment or whatever, but if the investors don't care, then the information can be meaningless and companies are not going to do anything about it. I think that interest will make a difference in investors and - if not - how can we make this information useful to investors? That can drive the loop back to making companies be more socially responsible.

"My work has been on ethics and social issues for the last 15-plus years, so there is a lifelong travail for me in trying to install ethics into the financial accounting environment."

Wood said, "Our study is meant to give us a snapshot of how investors currently understand the material impact of non-financial information on their stock purchases," Wood said. "We are going to focus on three particular areas: corporate governance; what we are calling the 'social area' of reporting which includes everything from human rights concerns and the supply chain to customer satisfaction and employee retention; and industry cohort standards - what kind of comparisons within industry sectors do people find relevant to their decision-making?

"All of this is meant to give us a better idea of where the field stands," Wood said. "I think this is a unique study and I think if it goes according to plan it will indeed break new ground in our understanding of how investors are interpreting this new wave of information that is coming their way."

NASD is the nation's leading private-sector provider of financial regulatory services.

-Reid Oslin

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