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Russian firms need to improve investor relations
19 June 2012
Investors are positive about future opportunities in Russia but corporate governance and government control are big issues, says JPMorgan
Investors are optimistic about opportunities in Russia over the next three years, according to a new survey by JPMorgan’s depositary receipts business.
The country is attractive due to its economic growth rate, abundance of natural resources, low debt levels and healthy employment levels, the survey found.
However, North American and European investors said Russian companies must strengthen their corporate governance standards and improve investor communications in order to attract and keep foreign investment. Respondents also said there was a general lack of regulation to protect investors.
The majority of respondents said government control is a significant issue when investing in Russia, for example government demands tend to take priority over the responsibility of companies to minority shareholders. Investors said that government demands too often take precedent over companies’ responsibility to minority shareholders, the result of which includes inefficient capital allocation decisions, limited return on invested capital, and insubstantial or nonexistent dividend payments.
Investors suggested that the best way for Russian companies to improve their investor relations efforts was to give investor relations officers senior level insight, adopt the financial reporting and disclosure practices of developed market companies, increase the accessibility and visibility of senior management, and establish consistent communication with the investment community.
The country’s equity market is evolving along with a strong commodity base and improvements in market infrastructure, said Dennis Bon, global head of JPMorgan’s depositary receipts business.