The balance sheet scandals of the US corporations Worldcom, Enron and Xerox have led to long-term uncertainty in the global stock market. In their quest to find some certainty in these rather uncertain times, financial experts in Germany consider transparency in regard to the balance sheet data of coorporations to be evermore important.

The analysis of companies' shares must once again reveal hard truths, rather than concerning vague potentials and predictions. This is the finding in a survey carried out  in July this year amongst 269 financial experts from the fields of banking, insurance and industry, by the Mannheim Centre for European Economic Research (ZEW), as part of the ZEW Financial Market Survey.


A clear majority of the surveyed financial market experts agree that the relevance of balance data for the analysis of German shares has increased in the past few months. This is the case for DAX companies, as well as for newly established firms. Only a fifth of the experts believe that balance sheet data has become less significant. In view of recent reports about corporations in the US, as well as in Germany, fiddling their balance sheets, balance sheet data now seems to be studied much more carefully. The latest example of this is the discussion which took place about the financial services provider, MLP. Analyses of technological companies now seem to again be based much more heavily on the solid financial situation of firms, rather than on somewhat vague predictions of their future potentials.


Alongside criticism of the overall significance of balance data, around half of the surveyed experts also expressed the view that the significance of data largely depends on which economic institution has carried out the analysis of a corporations balance sheet. In the view of financial experts surveyed by ZEW at least, there are significant differences in terms of the quality of the work completed by various financial analysts. Such discrepancies may potentially lead to an increase in the degree of competition between financial analysts, in terms of the quality of analyses.


In view of the current scepticism surrounding balance sheet practices, the communication of firms in capital markets is becoming evermore important for investor relations. Communication should ensure that investor loyalty is maintained. In this respect, the ZEW survey had some particulary positive findings for German companies: Analysts in Germany feel almost as well provided with important, stock-market-relevant information as analysts in USA and Great Britain.



Dr. Matthias Meitner, E-Mail:

Dr. Felix Hüfner, E-Mail:

Volker Kleff, E-Mail:

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