DAX reporting: Media distorts the view of market success

DAX reporting: Media distorts the view of market success

Media reporting on the German DAX stock index shows alarming distortions, as a recent study by Ciccone and Rusche shows. The investigation includes ZDF meine-journal and analyzes reporting on the DAX in the period from 2017 to 2024. meine-journal, one of the most watched news formats on German television, covered the DAX topic in over 1,800 programs on around 30% of trading days. What is interesting is that despite an average increase in the DAX of around 7% per year, the daily change reported in today's journal was on average negative at -10 points. This means that the real development of the DAX, which rose from 11,481 to 16,000 points, does not correlate with the reporting, which suggests a fictitious decline of 8% per year.

The dominance of negative DAX reports is primarily due to the greater relevance of negative developments. Statistical peculiarities also show that larger losses generally occur more frequently than equally large gains. The media focuses primarily on strong movements, regardless of direction. This distorted view of the DAX development contradicts the positive market development and requires a correction in reporting. The study suggests that journalists should link daily reporting more closely to long-term perspectives in order to paint a more realistic picture. The study by Ciccone and Rusche is entitled "Reporting Big News, Missing the Big Picture? Stock Market Performance in the Media" and is published in the MPI Collective Goods Discussion Paper.

Non-financial reporting is changing

Parallel to the developments in media reporting, non-financial information in corporate reporting is also undergoing a fundamental transformation. A growing political will for change and increasing regulatory requirements - including the EU taxonomy and the CSR-RUG - are putting companies under increasing pressure. In this context, the importance and demands on voluntary communication about sustainability performance have increased. According to a recent study of the non-financial reporting of DAX 160 companies, 106 out of 160 companies have already published a sustainability report, with 85% of the reporting companies applying the GRI standards.

The research shows that 9% of companies do not use a framework. Interestingly, 71% of companies reported according to the “Core” option of the GRI standards, and 91% of reports included a materiality analysis. In addition, 81% of companies identified respect for human rights as a key issue, an increase of 18 percentage points. The trend towards integrating sustainability-related KPIs into the executive compensation system also shows increasing relevance, with 71% of compensation reports containing corresponding KPIs.

ESG reporting and its standards

The analysis of the ESG reporting of the DAX 40 companies from 2019 to 2022 illustrates the changes in the scope and quality of this reporting. The average number of pages of annual reports increased from 252 pages in 2019 to 307 pages in 2022, while sustainability reports fell slightly, from 102 to 116 pages. Despite the increased scope of reporting, the study does not show a significant increase in the complexity of the content. Companies strive to make their ESG reports readable and understandable.

In summary, the analysis shows that the challenges in reporting on the DAX as well as in the area of ​​non-financial reporting and ESG standards continue. Companies that strive to meet requirements while communicating a positive picture of their development can benefit from developments in best practice approaches and increase their transparency. These findings provide essential guidance for those working in finance and CFO to improve reporting practices and meet the challenges of the future.

For further information on the above studies and their results, you can download the published papers from the University of Mannheim, dem BDO and that SSRN remove.