ENESET: Need for reforms in the operation of Greek companies

A very pleasant news was reserved for the Greek market at the end of February, as the annual results of 29 non-bank listed companies showed in 2021 net profits increased by 241% compared to 2020 and by 40% increased by those of 2019, a year which is not was affected by the Covid-19 pandemic.

These performances, for which the results of the fourth quarter of 2021 had predicted us, are, according to estimates, not only a record for many of the most important companies in the country, but also a prelude to a long-term and sustainable increase in the size of listed companies.

This could mean that increased corporate cash distributions to shareholders can be a serious incentive to increase investment.

However, according to other estimates, the risks are not absent, as, despite the explosion of profitability, which is largely due to extraordinary factors, the general index of the Athens Stock Exchange is clearly below the levels of 2019. In addition, the current crises can not be ignored. (supply chains, energy market, high levels of inflation and, finally, the war complex in Ukraine and its unpredictable consequences).

These problems add to the traditional weaknesses of the Greek stock market, which is also regional in terms of EU markets, such as low valuations, low liquidity, the very low turnover ratio to be capitalized compared to the euro area, the sub-yield of listed companies compared to their European counterparts, the small average size of listed companies and the very small average capitalization per company (four times in the euro area and seven times in the rest of the world).

It is therefore necessary to carry out serious reforms, which will contribute to the strengthening of the pillars of the Greek market and will create an environment of stability, which will contribute to a more stable and efficient return on capital for investors.

As recently pointed out by Athanasios Kouloridas, Chairman of the Board of Directors of the Association of Listed Companies (ENESET) and Associate Professor at the Athens University of Economics and Business, one area in which there is serious room for improvement is the substantial adaptation of listed companies to a modern .

It is extremely important for companies to have executives on the BoD. as best they can to diagnose the problems of companies and markets in a timely and reliable manner, to propose the best solutions and to make the critical decisions.

However, because the adjustment to corporate governance requires, among other things, significant costs, there is an urgent need to introduce incentives, with an emphasis on taxation. For example, as ENISET has very cleverly suggested, an increased rate of deduction for corporate governance costs could be introduced for listed companies, in the same vein as the rules for research and technology costs, as both promote value. of the company.
In addition, it should be understood in Greek entrepreneurship that now, in the era of successive crises, and especially of the climate, the demand of investors for a strong environmental and social sign of the companies in which they invest is dynamically strengthened. This trend is not cyclical. On the contrary, Environmental and Social Responsibility (ESG) and sustainability have already become integral elements of business excellence.

Therefore, any company that is interested in attracting serious capital, in addition to securing profits for its investors, should be aware that its activity should be accompanied by strong environmental and social reciprocity.

Global trends are perfectly indicative of the new reality:

Κεφάλ Investment funds operating under ESG rules amount to more than 1.8 trillion, increased by 400% since 2016.

● The market for ESG bonds amounts to 2.2 trillion. worldwide in 2022 and is expected to reach 11 trillion. in 2025.

Ελλάδα In Greece we can see that this new trend is constantly strengthening, since the ESG index already represents 3/4 of the total capitalization, while significant successes of green bond issues have already been recorded.

In conclusion, the effort to strengthen the Greek market must be multifaceted: to aim at correcting inherent market imbalances, to set goals of modernization and efficiency in the management of companies, to bring Greek business closer to European operating standards, to offers incentives for listing on the ATHEX. and at the same time to recognize and make the most of the new trends and perceptions of large investors.

The road may be long, but it is not impassable …