Why country-by-country reporting helps an investor

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I was asked by someone today:

I’m trying to answer the question: as an American investor in an MNC how will country-by-country reporting improve my ability to make informed investment decisions? Put the other way, how could not having country-by-country reporting adversely impact my investment strategy?

My reply was:

  • I can assess the likelihood of reputation al risk arising from a location in which the multinational corporation is invested
  • I can assess political risk re sustainability of earnings and risk of nationalisation etc
  • I can assess the use of tax havens - and so the likelihood of challenge to taxable earnings - out of which I get my reward
  • I can assess the complexity of group structures - and so governance risk
  • I can assess where low royalties etc are being paid in the EI and so the risk or renegotiation
  • I can see whether labour in the supply chain is being exploited - and whether that gives rise to risk of business interruption, or reputation al risk
  • I can see where assets are and are not - and decide if this where I'd locate them - so I have a more informed basis for assessing management
  • I can assess growth by market, not just for the company as a whole or by product

Does that help you as an investor?

It would me.