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Business

Financial Reporting, the German Way

International investors have rapped German companies for failing to provide enough accurate information about themselves, according to a new survey.

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Looking for fuller sets of numbers

The report, produced by the investor relations firm Makinson Cowell, says international investors are looking for more detail in order to assess the future prospects of German companies and whether they want to invest in them.

Makinson Cowell’s findings are based on the replies from 39 institutions in the US and Europe, controlling investment funds worth €2.4 trillion.

Although the top end of German companies has adopted US reporting standards, it says, some have maintained other corporate traditions.

Investor confidence has been shaken by managers who have withheld information or not been clear about the economic outlook of their companies.

But it is unclear whether the criticism published by Makinson Cowell regards a peculiarly German problem, or whether the report suggests a clash of cultures brought on by globalisation and the spread of American standards.

Tight-Lipped Business Culture

Many investors reportely complained about German managers' tendency to give too optimistic a view of their companies’ future performance with the result that they frequently disappoint the markets.

"German companies are very tight-lipped and don’t provide any advance warning about potential problems", one investor is quoted as saying in the report.

"German companies are well behind in their IR practices compared with US and UK companies", said another. "They have a cultural style that makes it very difficult for them to be open and honest with their investors, and their regulatory system doesn’t require them to be more open".

Slowly Changing old ways

Communication has improved significantly where German companies are exposed to U.S. business practices.

SAP is generally regarded as one of Germany’s best corporate communicators, with Deutsche Telecom seen to be improving and Deutsche Bank widely acknowledged to lead in the banking sector.

"Overall, corporate Germany is ranked behind the UK and Scandinavia in terms of its relations with investors, but well ahead of the southern European countries, including Spain and Italy and ahead of France", the report says.

But on the whole, corporate communication culture in Germany is a mixed bag and many of the more traditional, family-owned enterprises still balk at the notion of publicising a full picture of their companies’ position on the market.

Makinson Cowell's report comes at a time when the German economy stands to grow by just 0.6 percent this year, compared to 3 percent in 2000.

There is little doubt, according to the report, that better communications would lead to robuster foreign investment in Germany.